Consumers downloading electronic books, software, music, movies and games may see an increase in charges as companies strive to collect the additional tax required by law to meet the new EU demands.
Currently only EU businesses in the 15 member countries (with a further 10 to join the EU by 1st May 2004) have to charge VAT. But from 1st July all businesses will have to comply with this new law, although enforcement could be difficult.
Suppliers outside the EU will have to charge the VAT rate in the EU country where the consumer resides. Consumers will no longer be able to order services from non-EU countries, e.g. the US,to avoid paying VAT.
To help companies understand the new system and to help them calculate the likely impact of EU VAT on their revenues, PricewaterhouseCoopers has launched a specific tax website, pwcebiztoolkit.com. The site will also assist both EU and non-EU businesses to determine whether they can save VAT on revenues depending on where they decide to locate their businesses.
Individual Member States of the EU have, in most cases, not yet provided information about the registration procedures or related guidelines on how they will manage the new system, which gives businesses an extremely short timescale to put their systems in place before the deadline of 1st July 2003.
John Fay, PwC VAT Partner, PwC Ireland commented:
"These new rules will cause major challenges for businesses who have to adapt their systems to meet the requirements. We hope that the web site will help in enabling them to understand the issues they need to be addressing now in planning for compliance with the new arrangements."