European Court says no to reduced e book VAT
The European Court has decided that e books cannot be subject to a reduced rate of VAT. Luxembourg and France both applied a reduced VAT rate to books in an electronic format and the matter was referred to the Court by the European Commission. The Court accepted that when the VAT directive had been redrafted in 2009, the new wording which applied a reduced rate to books ‘on all physical means of support’ was arguably designed to cope with technical progress and changes to the meaning of ‘book’.
However, the VAT legislation clearly did not apply a reduced VAT rate to ‘electronic services’ and since e books were clearly electronic services it could not apply to them.
Quite how this fits with the earlier European Court K Oy book judgement which accepted that in some cases a reduced rate could apply is something which those taking the various e book liability challenges will no doubt be working on. Its rather a shame that the Court decided to proceed straight to judgment without an initial Advocate General opinion which might have explored these questions. However, one assumes that following France and Luxembourg, that in order to apply a reduced rate to all e books that EU legislation must be amended to make an explicit reference to such a rate.
One must also hope that the eventual outcome of all these cases is not that its is accepted that both e books and print book serve the same needs and should both be standard rated for VAT.
Quite how this cases impacts on attempts to argue that E book sales in the UK should be zero rated remains to be seen. Our zero rate is based on a different EU provision so there may not be an automatic read across but if e books must be standard rated electronic services in France and Luxembourg hen its hard to see how they can be zero rated in the UK.
The judgments can be found at: