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New EU tax rules stand to stimulate cross-border payments for U.S. merchants

American Banker

Online cross-border payment technology is opening new markets for e-commerce firms and new shopping options for consumers — but the European Union’s tax system hasn’t kept pace, creating compliance headaches for U.S. digital merchants and confusing bills for customers on the Continent.

In an attempt to fix that problem, the European Commission has simplified its value-added-tax (VAT) regulations governing online sellers and cross-border payments. VAT, which is assessed in Europe and other countries, is the equivalent of a sales tax but is structured differently. U.S. sales taxes are levied at the point of sale as a percentage of the overall purchase, while VAT is based on calculations that determine the increase in value of a good or service at different stages of production or distribution.