On 6 May the EU Commission announced its strategy for Digital Single Market. The aim is to further simplify and harmonize the applicable VAT and legislative rules to e-biz and e-commerce (in particular re telecommunication and copyrights) as well as to reduce the administrative burden companies are facing in this field.
The Italian Parliament passed the 2015 Finance Law on 22 December, which applies the 4% VAT rate to e-books as of 1 January 2015. According to the legislation any publication that is identified by an ISBN code (International Standard Book Number) and transmitted through any physical or electronic means, should be considered as a book and as a result subject to the 4% reduced VAT rate.
On 4 April, the European Commission has published Explanatory Notes to prepare businesses for the new VAT rules for telecom, broadcasting and electronic services, which will enter into force on 1 January 2015.
The aim is to help businesses to be fully prepared on time for the change-over, whereby VAT on telecom, broadcasting and electronic services will be charged where the customer is based, rather than where the seller is.
The Explanatory Notes are available on the EU Commission’s website in English (click link). (It will later be translated in all EU languages, as well as in Chinese and Japanese.)
We will discuss the key provisions and critical issues of the EU Commission’s Explanatory Notes with businesses, delegates of the Member States and the Commission during our next B2C 2015 Working Group meeting in Brussels, on 23 April 2014.
The EU Commission has published practical guidelines on the mini-one-stop-shop to prepare businesses for the new B2C VAT rules for telecoms, broadcasting and eservices, which will enter into force with 1 January 2015.
The aim is to help businesses to be fully prepared on time for the change-over, whereby VAT will be charged in the country where the customer is based.VAT will have to be collected by all providers of telecom, broadcasting and eservices, regardless whether they are established inside or outside of the EU. Find out more
The results of the public consultation on the review of the existing legislation on VAT reduced rates are now available online.
A total of 333 contributions were received and the greatest number of submissions originated from Belgium (76), followed by those from Germany (65), France (52) and the United Kingdom (48).
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.”
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.