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VAT
in Europe - and how
to get the lowest rate
Based on an EU Directive on on-line sales, non-European
companies from the US and Asia are obliged to pay VAT in the
country of the European end consumer – unless they have
a subsidiary in Europe: in this case they can invoice with one
set VAT tax. As Madeira has one of the lowest VAT levels in
Europe – 15% – it is a good idea to create a subsidiary
in Madeira. For this business, the backup or even the main server
should be installed in one of the data centres on the island.
The IT infrastructure leaves nothing to desire because the submarine
cables from the USA, South America and Africa end in Madeira.
Here the signals are boosted and sent on to the mainland, and
Madeira profits from the most modern technology available. |
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CFC
(Controlled
Foreign Companies)
In Europe, there is a knot to unwind: national
so-called CFC (Controlled Foreign Companies) laws have been
set up by several Governments to avoid tax evasion but in a
preliminary decision by the European Court of Justice in the
case of Cadbury Schweppes versus the English Inland Revenue,
the court indicated that these laws are incompatible with European
law because they restrict the freedom of movement of capital.
Such laws can not be applied if the CFC is indeed the centre
of decision and does have substance in form of an office and
employees. Therefore, any company in the FTZ is safe if it has
an office, some invoices and maybe also staff, for instance
a local Manager, on the payroll.
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