Tag Archives: ebooks

France: Infringement procedure on VAT rates for ebooks published

We have been discussing the developments about the EU Commission’s infringement procedure against Luxemburg and France related to their application of the super reduced VAT rates for ebooks several times in the past (last time here). The EU Commission is of the view that under the current VAT Directive rules ebooks should be regarded as all other eservices and taxed with the standard VAT rate. Luxemburg and France are of the opinion that ebooks should be taxed as their physical contra-parts – i.e. as books.

As reported on PwC’s GlobalVATonline, the Court of Justice of the European Union (“ECJ”) has recently published the EU Commission’s infringement procedure case against France. There is no official news about the infringement procedure case against Luxembourg available at this moment.

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EU Commission refers France and Luxembourg to the European Court of Justice over reduced VAT rates on ebooks

As reported, France and Luxembourg have started to apply reduced and super reduced VAT rates to ebooks without obtaining an approval from the rest of EU. This gave them competitive edge over the rest of the EU countries, as companies which were selling ebooks to their EU B2C customers from those two countries could sell them at the lowest available VAT rates (3% for sales from Luxembourg and 5% for sales from France). This (in words of Commissioner Šemeta, responsible for taxation) “runs counter to the fundamental EU principle of fair tax competition.”

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Will Switzerland implement reduced VAT rate for ebooks?

As discussed before, France and Luxemburg decided to apply the reduced VAT rate to ebooks, most likely also to attract publishing companies to their countries. As this treatment does not comply with the applicable EU rules, the EU Commission initiated the appropriate action against these two countries.

As Switzerland is not part of the EU, EU VAT rate restrictions do not apply. According to the Swiss Parliament’s website the “Bundesrat” is requested to consider the application of the reduced VAT rate to ebooks, as part of the ongoing review of the VAT legislation.

It appears that Swiss legislators would like to remove the distinction in VAT treatment which exists between paper books and ebooks.

What does this mean for you?

If you are involved in publishing or distributing ebooks, you should also monitor the Swiss ebooks and eservice developments. As you might be already aware you are required to register for VAT in Switzerland if your B2C sales to Swiss residents exceed CHF 100’000 in a single calendar year.

EU: ebooks infrigement procedure – second act

As you are probably aware, France and Luxembourg have on 1 January 2012 started to tax the sales of ebooks at reduced VAT rate instead of applying the standard VAT rate. This means that ebusinesses selling ebooks through a sales entity in Luxembourg were able to tax them at 3% rate instead of 15% and in France at 7% rate (5,5% as of 1 January 2013) instead of 19,6%.

The EU Commission in its role of the guardian of the EU Treaties and legislation does not agree with the unilateral decision of France and Luxembourg and has therefore initiated a formal infringement procedure and has in July 2012 send them a Letter of Formal Notice.

A very good and conveniently brief explanation on the infringement procedure and its implications can be found here.

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EU: Public consultation on new VAT rates – important for ebooks, digital newspapers and other eservices

In line with its previous indications the European Commission launched a public consultation last week in relation to the review of the reduced VAT rates. The public is invited to give their opinion on certain reduced VAT rates to see if they efficiently serve the purpose what they were created for.

The consultation forms part of the Commission’s VAT reform plans to build “a simpler, more robust and efficient VAT system”. And Commission is asking business for their input to this matter. It is your chance to have a saying in the much aniticpated reform of the EU VAT system.

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EU: E-book rates – Commission strikes back

As reported previously here, here, and here, France and Luxembourg have unilaterally decided to tax e-books at a (super)reduced VAT rate. They decided to tax them as “normal” books instead as e-services as they should be treated by the letter of the EU VAT Directive. This gave e-book traders established in France and Luxembourg a considerable advantage when selling e-books to their EU customers compared to e-book traders in other EU countries as it made the e-books in France and Luxembourg approx. 12% cheaper than before (reduction to a 3% super-reduced VAT rate instead of the standard rate of 15% in Luxembourg and to 7% instead of 19.6% in France).

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EU: What is the correct VAT rate for e-books?

The Luxembourg VAT Authorities have issued a Circular stating that no distinction should be made between books on physical and electronic means, meaning that the super-reduced 3% rate already applicable to books should also apply to e-books. The Circular is effective as of 1.1.2012 (read more). It seems to us that Luxembourg has adopted this position as a response to France’s recent decision to adopt the reduced rate of 7% for e-books published by companies based in France (read more), even though Luxembourg officials claim that it is based on the content of the “Green paper” on future of the EU VAT system, which is actually aiming to plot the  future of the EU VAT system (and not current VAT legislation).
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