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Customs have issued a Business Brief clarifying its policy on the VAT treatment of Internet service providers, as previously outlined in Business Brief 22/97. It follows a policy review undertaken by Customs in this area, and, in particular, recent political agreement at ECOFIN on the terms of certain changes to European Community VAT law.
Customs have issued a Business Brief clarifying its policy on the VAT treatment of Internet service providers, as previously outlined in Business Brief 22/97. It follows a policy review undertaken by Customs in this area, and, in particular, recent political agreement at ECOFIN on the terms of certain changes to European Community VAT law.
A lasting, fair and clear approach, whereby all Internet service packages supplied by the United Kingdom and non-European Community countries are taxed in a similar way can only, in Customs' view, be successfully achieved through material changes to the relevant European Community VAT rules. Such changes are now in prospect through the terms of the VAT and e-commerce directive (to be formally adopted shortly).
This directive further amends the European Community place of supply rules for services so as to establish an additional category of services (including digitalised products, and so content provision) which are subject to VAT not by reference to the location of the supplier but by reference to the location, ordinarily, of the consumer. As a consequence of these changes, with effect from 1 July 2003, all Internet service packages will be subject to tax in the European Community irrespective of the location of the supplier and/or the balance between the constituent elements of the package. Thus non-European Community Internet service providers will be required to account for VAT on their services. In the interim, the current treatment, as set out in Business Brief 22/97, will continue.
(Source: Customs Business Brief 6/2002 dated 14 March 2002.)
