This blogger is somewhat confused as to where the court is heading. It seems that computer programs sold online, which are analogous in many respects to e-books, are treated like real books when it comes to exhaustion of rights, as in Case C‑128/11 UsedSoft, but that real books and e-books are treated quite differently when it comes to VAT. Comments, anyone?France and Luxembourg cannot apply a reduced rate of VAT to the supply of electronic books, in contrast with paper books
In France and in Luxembourg, the supply of electronic books is subject to a reduced rate of VAT. Accordingly, since 1 January 2012, France has applied a VAT rate of 5.5% and Luxembourg a rate of 3% to the supply of electronic books.
The digital or electronic books at issue include books supplied, for consideration, by download or web streaming (‘streaming’), from a website so that they can be viewed on a computer, a smartphone, electronic book readers or other reading system.
The Commission has asked the Court to declare that, by applying a reduced rate of VAT to the supply of electronic books, France and Luxembourg have failed to fulfil their obligations under the VAT Directive [that's Council Directive 2006/112 on the common system of value added tax].
In today’s judgments, the Court upholds the Commission’s action for failure to fulfil obligations.
Moreover, the Court finds that the VAT Directive excludes any possibility of a reduced VAT rate being applied to ‘electronically supplied services’. The Court holds that the supply of electronic books is such a service. The Court rejects the argument that the supply of electronic books constitutes a supply of goods (and not a supply of services). Only the physical support enabling an electronic book to be read could qualify as ‘tangible property’ but such support is not part of the supply of electronic books.
The Commission also criticises Luxembourg for applying a super-reduced VAT rate of 3%, even though the VAT Directive prohibits, in principle, VAT rates lower than 5 %. The Court recalls that, according to the VAT Directive, a Member State may apply reduced VAT rates lower than 5%, provided that, among other things, the reduced rates are in accordance with EU legislation. Since the Court held earlier that the application of a reduced rate of VAT to the supply of electronic books does not comply with the VAT Directive, the requirement that it comply with EU legislation is not met with the result that Luxembourg cannot apply a super-reduced VAT rate of 3% to the supply of electronic books.
The judgments delivered by the Court today do not prevent Member States from introducing a reduced rate of VAT for books on physical support, such as paper books.
Thursday, 5 March 2015
CJEU rules on variable VAT rates for e-books and paper books
The Court of Justice of the European Union gave a ruling today in Cases C-479/13 and C-502/13 Commission v France and Commission v Luxembourg on the taxation of e-books. According to the Curia website's media release: