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EU refers France to CJEU for e-book tax reductions

printer Mail

The European Commission has referred France to the CJEU for its use of a reduced VAT rate for e-books. The action was launched last week following October’s Council of Ministers meeting. The EC claims that France has failed to comply with the EU VAT Directive which requires the full VAT rate to be charged on digitally distributed books – compared to the reduced rate allowed for printed books.  France currently charges a VAT rate of 5.5% on both e-books and printed books, in direct contravention of the Directive.

According to TMF Group, ‘the anomalies in e-book VAT rates arise because countries have long been permitted by EU law to charge reduced or nil VAT rates on printed books, as they are viewed as being of special social benefit. However, since the VAT laws were drawn up prior to the modern digital age, e-books were never been given a similar derogation. Some countries have broken ranks on VAT rates (e.g. France and Luxembourg), often to encourage the digital industry to locate in their country, and sell to consumers in any country. This is seen as unfair competition by countries such as the UK and Germany.’

Richard Asquith, head of tax at TMF Group commented: ‘The pressure from Germany and UK is telling. The EC threatened France last year with legal action. It appears to have lost patience with diplomatic routes, and is no longer going to push this through the EU courts to get a change.’

Issue: 1193
Categories: News , Indirect taxes , VAT