EU Tax Case Rules on Electronic Books

The European Union’s (EU) top court has ruled that electronic books cannot benefit from the same reduced rate of value-added tax (VAT) as paper books. However, the European Commission has indicated that it could change the rules next year so e-books and paper books are taxed similarly.

Since 2012, France has applied a 5.5% VAT rate and Luxembourg a 3% VAT rate on e-books, the same rate as for paper books. The European Court of Justice (ECJ) decreed that both countries must apply their normal VAT rate, which for France is 20% and for Luxembourg is 17%.

In 2013, the European Commission (EC) sued both countries for breaching of the EU’s VAT rules, a position that was upheld by the Luxembourg-based ECJ.

US e-books retailer Amazon, based in Luxembourg, had applied the 3% rate to sell e-books throughout Europe. This changed in January this year and VAT for e-services is now levied based on the country where the customer is located.

In its ruling, the ECJ argued that a reduced rate can only apply to physical books and that even though e-books can be read on tablets and computers, they should be considered “electronically supplied services”, not goods. EU law decrees that reduced VAT rates can only apply to goods, not e-services.

France and Luxembourg agreed to comply with the verdict, but will lobby for an overhaul of EU rules on VAT in order to align rates between physical books and e-books.


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