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Value Added Taxation of Electronic Supply of Services within the European Community

Cecília Hargitai *

• I. Introduction
• II. Value Added Tax in the European Community
  • 1. The Common Market as a Background to the European System of VAT
  • 2. Characteristics of the VAT
  • 3. The European VAT System
    • (a) Scope
    • (b) Taxable Person
    • (c) Taxable Transaction
    • (d) Place of Taxable Transaction
    • (e) Taxable Amount
    • (f) Rate
    • (g) Exemptions
    • (h) Small Business Scheme
• III. Shortcomings of the Present European VAT System with Respect to Electronic Supplies
  • 1. Classification of E-Commerce Transactions
  • 2. General Problems of the Operation of the VAT System
  • 3. Specific Problems of the European VAT System Owing to E-Commerce
    • A. Theoretical Problems of the Place-of-Supply Rules of the Sixth Directive
      • (a) Classification of Digital Transactions - Goods or Services?
      • (b) Detailed Analysis of the Place-of-Supply Rules of the Sixth Directive Governing the Supply of Services
    • B. Problems with the Practical Application of the Place-of-Supply Rules
      • (a) Goods or Services? What type of service?
      • (b) Identifying the Consumer: Finding out Its Location and Tax Status
      • (c) Determining the Place of Effective Use and Enjoyment
      • (d) Administrative Problems
  • 4. Consequences of the Dysfunction of the Sixth Directive
    • A. Revenue Loss
    • B. Distortion of Competition
• IV. Solutions
  • 1. Principles of the Prospective Amendments to the Sixth Directive
  • 2. Proposal for a Council Directive Amending the Sixth Directive
    • A. The Proposal in General
    • B. Place-of-Supply Rules
      • (a) Place-of-Supply Rule I.
      • (b) Place-of-Supply Rule II.
      • (c) Rate
      • (d) Discharge of VAT Obligations by Electronic Means
  • 3. Critique
    • A. Theoretical Questions
      • (a) Goods/Services?
      • (b) Place-of-Supply Rules
      • (c) Right to Tax Deduction
      • (d) Exclusion of Reduced Rates
    • B. Implementation
      • STEP I
      • STEP II
      • STEP III/a - IV
      • Enforcement
  • 4. Alternatives
    • A. Exemption
    • B. Zero-Rating
• V. Conclusion
• Bibliography

* LL.M. Harvard Law School (2001), associate at the Budapest Office of Weil, Gotshal & Manges LLP

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© Cecília Hargitai 2001