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The European Union’s ongoing consideration of VAT (Value Added Tax) assessments as related to online gambling services is back in the news, following the release this month of the latest working paper by the EU’s VAT Committee.
As a form of a consumer tax, VAT considerations have never been a popular topic with online bettors, while the EU has had difficulties in recommending a formal structure equitable to all EU member nations given the ease of providing cross-border online betting services by Europe’s dozens of major online firms.
The latest working paper takes another stab at the topic, though it’s just a set of generalized recommendations and industry findings that has yet to be approved by the EU itself. Among the key findings, as they are likely to be applied to online gambling, are that the EU’s formal shift made at the start of 2015 regarding the location that online financial transactions related to electronic services is considered to be initiated will have a significant effect on how VAT assessments will and should be made.
At the start of 2015, the EU adopted a rule that moves the virtual point of sale (or wager, as it relates to online gambling), to the customer’s location, rather than that of the supplier. As the working paper summarizes:
On 1 January 15 services supplied electronically that were previously subject to VAT in the Member State where the supplier is established, have become taxable in the Member State of the consumer when supplied to non-taxable persons within the EU.
That implies that suppliers of those services have shifted from having to present their VAT returns and fulfill any other obligation according to the rules of the Member State where they are established to present their VAT returns and fulfill the obligations of any of the Member States to which they are providing services. …
The move in general reflects the EU’s growing support for and aligns with online-gambling tax initiatives in such EU member countries as Ireland and the United Kingdom, both of which have (or plan to) enact new tax regimes targeting remote online-gambling operators at the same rates as physical home-country betting shops.
It also, as the VAT Committee’s new working paper duly notes, places something of an increased burden on EU-based online operators. Not only will they have to deal with possible varying VAT assessments per jurisdiction, should the working paper’s recommendations be formally adopted, they’d also have to deal with the possibility that certain EU jurisdictions may exempt from VAT consideration certain forms of online gambling.
As the paper continued:
[G]ambling companies have to deal with different conditions and limitations for the [current online gambling] exemption depending on the Member State in which they are supplying their services, to the point that there will be forms of gambling that will be exempted in some Member States and not in others.
The EU’s VAT Committee stresses that its recommendations are done in the pursuit of “fiscal neutrality” as it regards to these online, cross-border services. The paper also recommends that all EU member states develop and amend their own regulatory codes to provide additional clarity on the topic.
As the VAT assessments in general are designed to apply only to “added” services, payouts to bettors in the form of winnings and bonuses are likely to be excluded from the EU’s final code, if the committee’s recommendations are adopted.
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