Effective July 1, 2003, non-EU companies delivering electronic services over the Internet will have to collect value added tax (VAT) from their EU customers. Under European Council Directive 2002/38/EC, suppliers of electronic services will have to register with a Member State of their choice through a simplified registration scheme. Tax collected from EU customers will then be remitted to the Member State, who will re-allocate the VAT revenue to the country of the customer. The measures are designed to level the playing field between EU and non-EU suppliers.
Some examples of "electronically supplied services" affected by the new rules are:
- website supply, web hosting and distance maintenance of programs and equipment;
- supply and updating of software;
- supply of images, text and information, and provision of access to databases;
- supply of music, films and games (including gambling games), and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events; and
- distance teaching.