E-books aren’t really books – at least not for VAT

Two long-awaited judgements by the European Court of Justice (ECJ) have determined that reduced VAT rates cannot be charged on electronic books.

Since 1 January 2012 France has applied a reduced rate of 5.5% on e-books, while Luxembourg has been charging 3%. The European Commission challenged these rates on the grounds that they were contrary to the VAT Directive – even though the directive allows a reduced rate to be applied to physical books. The court has now backed the ECJ’s view by determining that there is no supply of any ‘physical support’ when customers buy a book in an electronic format. In addition, the court ruled that the VAT Directive does not have any provision for allowing a reduced rate of VAT to be charged on e-services.

As a result, physical books in the UK will continue to be zero-rated, while e-books will be subject to the standard 20% VAT charge.

“This is a good example of VAT law struggling to keep up with technological change,” says Robert Facer, Moore Stephens VAT expert. “The idea of buying a book in a digital format would have seemed strange 10 years ago. Now it’s a common occurrence, but the law doesn’t change as quickly.”

Given that this kind of VAT discrepancy will continue to arise as more digital products and services develop, member states may decide to push for the European Directive to be changed. “It seems contrary to the concept of fiscal neutrality that e-books and physical books are not treated in a similar way,” Robert says, “but we aren’t likely to see any change happen quickly.”


Robert Facer