Under current rules for e-services within the EU, VAT is due where the supplier is based, and at the rate set by that Member State. With the standard rate of VAT varying from 15% to 27% across the EU, businesses frequently establish in a Member State with a low standard rate, which then applies for the e-services they supply to all private customers throughout Europe.

The change in VAT rules from January 2015 will mean an end to this, as VAT will be charged at the rate of the customers’ country. This will apply whether it is an EU or non-EU business doing the sale. So a customer living in Copenhagen will be charged the Danish VAT rate, regardless of whether the supplier is from Denmark, Luxembourg or the USA.

This change will bring important benefits. First, it will ensure fairer competition between domestic and non-domestic businesses selling the same services. Second, it will create a more level playing field for SMEs and other companies that cannot relocate to a lower-tax Member State and who, up to now, may have lost out to more mobile competitors. Finally, it will ensure fairer distribution of tax revenues between Member States, as they will receive the tax on the services consumed by their own residents.

Source : press release http://europa.eu/rapid/press-release_IP-14-758_en.htm?locale=FR