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VAT treatment of e-books in EU

New EU VAT Proposal a Boost to European Booksellers

Ryan Bevan 6 December 2016 No comments


The EU Commission’s announcement on Thursday regarding the VAT treatment of e-publications has been welcomed by the majority of European booksellers. E-publications and online news subscriptions have always been at a tax dis-advantage in the EU because the current VAT directive states they must be taxed at a standard rate, whilst printed publications can benefit from a reduced VAT rating or even zero rating in the UK and Ireland.

Back in 2012, France and Luxembourg had already been setting reduced rates of VAT for e-books, but the European Commission took issue with this and ended up taking the countries to court. Online bookseller Amazon had chosen to place its European headquarters in Luxembourg in order to benefit from the lowest rate of VAT on electronic books in the EU and France was also hoping to flourish in the e-publication market by offering its own reduced VAT rate. The European courts concluded that this distorted competition across the rest of the EU and was in breach of EU tax laws, forcing the two countries to increase their VAT rate on e-publications to the relevant standard rate.

The Commission also declared that the sale of e-books constituted an electronically supplied service and application of a reduced rate to this type of service was to be excluded. In January 2015, Booksellers had to adjust to a change in EU tax rules as it was decided that VAT on electronically supplied services was no longer to be paid in the country of the seller, but in the country of purchase. This meant that businesses selling e-publications cross border to other EU countries had to register for the mini-one-stop-shop (MOSS) and apply VAT to their EU sales at the applicable VAT rate in each country they sold to.

The Commission’s most recent proposal in December 2016 will now allow member states (but not oblige them) to treat e-publications at the same VAT rate as printed publications and could come in to force as early as summer 2017. MEPs and national governments will have to sign off on the executive’s measures before it can become law. If all the EU member states agree on the proposal, then in some member states such as the UK, where printed books are zero-rated and e-publications are standard rated at 20%, there could be a significant reduction in cost for consumers. On the other hand, in EU countries that do not apply a reduced rate to printed publications such as Denmark, the proposal would have no impact at all.

Currently, e-book sales account for just 5% of all European book sales. The Commission believes that allowing a reduced VAT rate to align with printed books and media will improve this market share to 20% by 2021. However, some booksellers have argued the sale of online publications and e-books caters only for a smaller niche market of customers and that the predicted increase in sales is unlikely to be so high. Nevertheless, it is universally agreed that the measures are “destined to boost the e-book market and to further stimulate reading”.