eBay and PayPal have both recently moved their European head offices to Luxembourg. For PayPal the main advantage was a banking licence which allows it to offer services more attractive to mainstream businesses. For eBay undoubtedly it’s because the Duchy has a low VAT rate which is applicable to all fees charged to eBay users.
It’s not just eBay, Amazon, AOL and Skype have all relocated to Luxembourg to take advantage of their VAT rate to sell services to the rest of Europe. Up until now it’s seemed like a smart move until Germany removed it’s objections to reforms to Europe’s VAT regulations. If the reforms went ahead it would end low VAT rates and companies selling services over the Internet, regardless of where they were based, would charge VAT in the country in which the user was located. That would mean eBay users in the UK would be once again charged 17.5% VAT instead of the current 15%
eBay have just been thrown a life line though, European rules insist on unanimity on tax regulations and one country voted against the reforms effectively vetoing them for the foreseeable future. No real surprise that that country was Luxembourg who would have lost one percent of their GDP had VAT regimes changed.
What does it mean for eBayers? Well for non-VAT registered sellers there is no change, you still pay the same total fees regardless of the VAT rates. For VAT registered sellers in the UK the difference would have been a 1.85% net change in costs in their favour.