The European Commission has presented a proposal for a Directive to modify the VAT treatment of services supplied by electronic means (ie, online digital products such as downloaded music and software), together with subscription-based and pay-per-view radio and television broadcasting.
The proposal is designed to prevent the distortion of competition caused by current VAT rules.
Under the proposal, when electronic services are supplied for consumption within the EU they will be subject to EU VAT. The ‘reverse charge’ will apply for business to business transactions between businesses in different EU Member States, as well as to supplies from non-EU suppliers to businesses within the EU. Supplies by a business in one Member State to a private consumer in another will be subject to VAT in the supplier’s Member State.
