European Court decides to cut rate VAT on digital books
The European Court of Justice has agreed that a reduced rate of value-added tax may be applied to books that are provided in digital form.
The case concerned a publishing company that sought a preliminary ruling from the Finnish Central Tax Board (Keskusverolautakunta). It asked, in essence, whether books published on ‘physical supports’ other than paper – such as CDs, CD-ROMs, USB keys, or other equivalents – could be subject to a reduced rate of value-added tax, consistent with the typical treatment in the EU of tangible books.
The Keskusverolautakunta responded that only books printed in paper form or produced by comparable means could be regarded as a “book” for VAT purposes. On appeal, the Supreme Administrative Court (Korkein hallinto-oikeus) decided to stay the proceedings and sought guidance from the European Court of Justice.
The ECJ highlighted that, “as regards the principle of fiscal neutrality, it should be recalled that [the EU VAT Directive] precludes similar goods or services which are in competition with each other [from] being treated differently for VAT purposes.”
Drawing on the significance of this change, the Court said: “The question therefore arises whether, as a result of that amendment, a member state which has chosen to subject the supply of books printed on paper to a reduced rate of VAT is thereby compelled to extend the application of the reduced rate also to supplies of books on all physical supports other than paper.”
In the case at hand, the Court said it is for the referring court to determine whether the supplies are different with reference to the market penetration and uptake of such technologies: “As the ‘average consumer’s assessment’ is liable to vary according to the different degree of penetration of new technologies in each national market, and the degree of access to the technical equipment enabling the consumer to make use of books published on physical supports other than paper, it is the average consumer in each member state who must be taken as a reference.”
This ruling is expected to have a considerable impact on the ongoing cases brought by the European Commission against Luxembourg and France for their reduced rates on e-books, which it considers contravene EU law.
Source: taxnews- European Court decides to cut rate VAT on digital books
