IL Postcard

Luxembourg Fights Back as an Internet Haven

Date: 07/10/2007

In a rare show of fire, Luxembourg-one of the original founding countries of the EU-has stood up for its new status as an Internet haven for overseas companies.

The French economic newspaper Les Echos reported earlier this month that Luxembourg has vetoed a move by the EU to reform VAT rates. Currently companies providing online services from the land-locked duchy pay the EU's lowest VAT rate (15%), and Luxembourg has become something of an Internet tax haven for names such as AOL, Skype, and Apple, as well as TV broadcasters like RTL. (By way of comparison, the VAT rate in France is 19.6%, in Germany it's 19%, and 25% in Denmark.)

Traditional consumer services are taxed where the consumer is based in the EU, and the difference between the tax rates within European countries has encouraged non-EU firms to establish offices in Luxembourg. Luxembourg collects approximately 220 million euro on the Internet-related services' VAT rate annually, and is determined to keep this significant portion of its GDP as it attempts to move away from dependence on the banking and finance sector.

Best regards,

Maria Savage
International Living's European Consultant