Madeira - Non EU and EU Vendors

EU Vendors
Whilst not having the same complications as a non-European entity registering for VAT in a European Union country, the provision of a subsidiary company in Madeira, through which digitalised services are supplied to other European Union countries, will enable the business to charge VAT at 14%, the lowest standard rate within the European Union.

For an individual customer who is not able to recover VAT this will be a reduction in price, which can either be passed on to the customer, to give a competitive advantage, or retained as additional profit by the business.

The low rate of VAT charged from Madeira can give a considerable pricing advantage for digitalised services being delivered to non-VAT registered individuals and businesses within the European Union. The Dixcart Data Centre Madeira enables the provision of digitalised services from Madeira in a secure, controlled and cost-effective way.

Non-EU Vendors
Prior to July 2003 a vendor from outside of the European Union did not have to charge VAT on services provided from outside of the European Union into the European Union. However, suppliers within the European Union did have to charge VAT. This was obviously not equitable and was the reason for a change in the rules.

As from 1st July 2003 a non-European Union vendor must register in one of the member states of the European Union. All VAT remittances and compliance are to be organised through the country in which the seller is registered. The country of registration will then remit-on the tax it collects to other EU states in which the sales have been made.

It is important to note that VAT will be charged based on the rules applicable to the customer’s country. With over 30 EU member states this could mean 30 or more different rates of VAT could be charged (presently from 25% for Denmark, Sweden or Hungary to 14% for Madeira).

The home address of every customer will need to be obtained, VAT calculated depending on that information, and the information then passed, together with the VAT, to the authorities. There are clearly complications in establishing the location of each customer in the EU and whether or not the customer is VAT registered in its own country of residence.