Tag Archives: Luxembourg

Luxemburg – e-books are subject to the standard VAT rate as of 1 May 2015

The Luxemburg tax authorities were rather quick to the react on the ECJ’s recent decision on the VAT treatment of e-books. As reported in our previous post, in the infringement procedure against Luxemburg and France the court held that these countries incorrectly applied reduced VAT rate to the sale of e-books.

It is confirmed in a “Circular” published by the tax authorities on 16 March that Circular 756 is revoked with effect from 1 May 2015, and as of that date the standard VAT rate of 17% should be applied to the sale of e-books. (Please refer to the news update on PwC’s GlobalVATOnline.)

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E-books – ECJ rules reduced VAT rate is not applicable

The ECJ today delivered its long awaited judgments on the infringements procedures against France and Luxemburg on the application of the reduced VAT rates to e-books.

The court held that, in line with the VAT Directive and Implementing Regulation, e-books qualify as electronically supplied services, and as such reduced VAT rates cannot be applied. Therefore, the VAT treatment of printed books (or more precisely, “books on of all physical means”, according to the VAT Directive), which are taxable at the reduced VAT rate in most EU countries, cannot be extended to e-books. In this respect, the ECJ also quoted its previous decision in the Finnish K Oy case, in which the court decided that the reduced VAT rate may be used for the sale of books on CDs or USB siticks, as these are “physical means”.

Accepting the ECJ’s argumentation and strict interpretation of the relevant legislation, the only option to use the reduced VAT rate for e-books as well, is to change the legislation. This is likely to be done as part of an overall review of the VAT system, which will be a longer process.

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Luxembourg: Infringement procedure on VAT rates for ebooks

Not long ago we have updated you about the EU Commission’s infringement procedure against France related to their application of the super reduced VAT rates for ebooks. France and Luxembourg share the opinion that ebooks should be taxed as their physical contra-parts (as books), whereas the EU Commission has the opinion that under the current VAT Directive rules ebooks should be regarded as all other eservices and therefore taxed with the standard VAT rate.

Following the published case against France two weeks ago, the Court of Justice of the European Union (“ECJ”) has also published the EU Commission’s infringement procedure against Luxembourg. Some more information are available at GlobalVATonline.

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Luxembourg: VAT rate increase as of 1 January 2015

In his recent “State of the Nation” speech Luxembourg’s Prime Minister, Jean-Claude Juncker announced that the standard VAT rate in Luxembourg will increase with effect from 1 January 2015 (i.e. from the date when the new VAT rules for B2C sales of eservices will become applicable in the EU). Mr. Juncker has explained, that this VAT rate increase should help Luxemburg to counterbalance the expected loss of the VAT revenues due to new VAT rules on eservices.

Current standard VAT rate in Luxembourg is 15%. Even though the new VAT rate has not been disclosed yet, we understand that the Luxembourg’s government intends to maintain the lowest standard VAT rate in the EU also after the proposed increase. This would mean that the new standard rate will have to be somewhere between 16% and 18%. Find out more

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: 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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