ECJ Decision (K Oy): VAT rate for non-printed books can only differ if they meet different needs for consumers

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.

It will be interesting to watch the further developments in the pending infraction cases against Luxembourg and France over reduced VAT rates on electronic books (C-479/13 and C-502/13).

About Sophie Claessens

Senior Tax Manager PricewaterhouseCoopers Tax Consultants Belgium email: Mobile: +32 473 91 05 67 Office: +32 3 259 3169

Sophie Claessens is an international VAT advisor, based in Antwerp, Belgium, with a particular focus on business-to-consumer industries, including telecommunications, media, internet and e-commerce. She supports major industry players on sector-specific issues, including VAT compliance at both an operations and strategic level, and is directly involved in policy work for businesses in these industries, both at the Belgian level and at the level of the European Commission. She is responsible for indirect taxes in the communications sector at PwC Belgium and is a driver of PwC's Business Working Group on the EU 2015 VAT changes. She has authored articles for publication in Belgian and international tax journals.