On 11 September 2014, the Court of Justice of the European Union (ECJ) gave its decision in K Oy regarding the question whether reduced rates for printed books should equally be applied to books published on another medium, or whether different VAT rates can be justified (case C-219/13 – click link) .
The Court has ruled that a selective application of the reduced VAT rates to printed books is not justified unless the printed books meet different needs for consumers as compared to books published on ‘other physical means of support’ (i.e. CD, DVD, USB stick).
The Court also finds that, to determine whether goods or services are similar, the average consumer in each Member State must be taken as a reference.
If what matters for that consumer is essentially the similar content of all books, regardless of their physical support or characteristics, the selective application of a reuced VAT rate is not justified.
What could this mean for publishing businesses?
Although this case only deals with books published on a physical medium, it brings interesting perspectives as to the application of reduced rates to electronic books, i.e. books published in digital form and readable on the consumer’s computer(s) and/or other electronic devices.
This decision confirms the trend in ECJ case law that compliance with the principle of fiscal neutrality should be assessed against the consumer’s experience and the economic reality.