Value-Added-Tax rules on radio, television and Internet broadcasting in the European Union will be extended for a further two and a half years until the end of 2008, under European Commission plans un

Value-Added-Tax rules on radio, television and Internet broadcasting in the European Union will be extended for a further two and a half years until the end of 2008, under European Commission plans unveiled Tuesday (May 16).

The measures, which fall under the EU's e-commerce VAT directive of 2002, were due to expire in July. Without this extension, EU broadcasters would be subject to VAT even for broadcasts outside the EU. They would also face competition within the EU from broadcasters in third countries that would not be subject to VAT at all.

EU taxation commissioner László Kovács appealed to EU governments to confirm the extension as soon as possible. "I cannot imagine we would revert to the rules prevailing before the e-commerce directive was introduced," he said. He also called on EU ministers to agree new rules to give permanent effect to the measures in the directive.

The Commission -- the EU's executive authority -- already proposed last July that VAT revenues from broadcasting, telecom services and e-services accrue to the EU member state where those services are consumed. And in October 2004, the Commission called for a "one-stop shop" for cross-border VAT, which would simplify pan-European broadcasting. However, EU governments are still discussing the two proposals.

The Commission says the e-commerce VAT directive has worked well and created a level playing field for the taxation of electronic services. The measures ensured that electronic and broadcast services supplied for consumption outside of the EU are exempted from VAT, but when broadcast within the EU, they are subject to EU VAT. Previously, broadcasters had to charge VAT when supplying services even in countries outside the EU.

VAT rates in the EU range between 15 and 25%. The rules apply to the digital delivery of software and computer services generally, plus information and cultural, artistic, sporting, scientific, educational, entertainment or similar services as well as to broadcasting services.

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