ALL BUSINESSES THAT sell their goods online to the European Union will be subject to new tax rules from today.
From now on digital products will be taxed at the VAT rate applicable in the consumer’s member state rather than the seller’s.
The rules are being introduced to stop companies that trade online – from multinationals like Amazon, Apple and Google to start-up businesses – from routing purchases through low-VAT countries such as Luxembourg.
VAT on digital products such as e-books, music downloads and apps was previously charged in the country of the supplier. However, from today VAT will be payable in the country where the digital product is bought.
Kenneth O’Flynn, Deputy Lord Mayor of Cork, said the move represents the EU’s “relentless desire to increase its take from VAT”.
This means Irish SMEs potentially have to charge and account for up to 75 different VAT rates in 28 countries.
This new Brussels tax grab will without doubt force thousands of micro-businesses to shut down.
O’Flynn said he has written to the European Commission to express his concerns.
Back in October, Finance Minister Michael Noonan said that the change is actually a good thing for Irish businesses.
“This VAT change means that member states will lose VAT revenue in respect of existing outward sales to consumers in other Member States but will gain revenue in respect of inward sales to their own consumers of these services,” Noonan said in the Dáil.
The new rules will level the playing field in Europe by removing the incentive for companies to locate in low VAT rate jurisdictions, which should enhance Ireland’s attractiveness for e-services companies.
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