EU breakthrough e-book reduced VAT rates

Wed 18th Apr 2018

The EU is close to resolving a tax dispute between France and the Czech Republic that would pave the way to reduced VAT rates on e-books.

Currently, following a March 2017 European Court of Justice (ECJ) ruling, electronic books are subject to member states’ higher, standard VAT rates. However, their printed versions enjoy reduced or nil VAT rates. This is because the EU VAT Directive – which controls VAT rate setting for member states – was drawn up before the emergence of e-books and did not name them for the tax subsidy.

Several member states, included France and Luxembourg, have lost a number of ECJ rulings in recent years in an attempt to reverse this fiscal anomaly.

In November 2016, the European Commission (‘EC’) proposed allowing countries to drop or eliminate their VAT rates on electronic books. However, the Czech Republic blocked the reform in June 2017, insisting it be linked to other anti-VAT fraud measures.

Since February 2018, there has been intensive discussions between France and the Czech Republic to resolve the impasse. French President, Emmanuel Macron, now looks set to accept a new compromise offer by the Czech Prime Minister, Andrej Babis. The current holder of the rotating EU Council Presidency, Bulgaria, has said it “is willing to make some efforts to improve the situation and explore the possibilities to reach a compromise decision.”

The Czech Republic suffered heavy criticism for holding the popular VAT reform hostage, and is anxious to break the deadlock. This could enable a loosening of the e-book VAT rules by 2019 as there is popular support by all other countries for the overhaul.

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