The ECJ delivered its long awaited judgments on the infringements procedures against France and Luxemburg, concerning their application of reduced VAT rates to e-books.
The court held that e-books qualify as electronically supplied services, and, as such, reduced VAT rates cannot be applied. Therefore, the VAT treatment of printed books (or more precisely, "books on physical means", according to the VAT
Directive), which are taxable at the reduced VAT rate in most EU countries, cannot be extended to e-books. The only way of having the reduced VAT rate applied to e-books as well, would be to change the EU VAT Directive, which will be a long process.
E-book publishers in France and Luxemburg (and presumably also Italy that only recently announced that it intends to apply a reduced rate for e-books) must change their respective national legislations and apply the standard VAT rate to the sale of e-books. Luxembourg has confirmed that it will apply the standard VAT rate of 17% as of 1 May 2015.
What does it mean for business?
Companies involved in the sale of e-books, in the jurisdictions mentioned above, will have to re-consider their pricing (i.e. a price increase or margin reduction) and implement the new VAT rates.
