Italy cuts e-book VAT from 22% to 4%

Mon 8th Dec 2014

Italy has introduced an amendment on 20 November 2014 to its tax code to reclassify electronic books (e-books) at the same reduced VAT rate as traditional, paper books.  This means e-books will be subject to the reduced rate of 4% instead of the standard Italian VAT rate of 22%.

The move comes following a failure by the current Italian presidency of the European Union in October this year to have EU agreement on reduced VAT rates for e-books.  Malta will cut its e-book VAT rate to 5% on 2015.

EU differences on e-book VAT

Currently, France and Luxembourg are the only two countries to charge reduced VAT rates on e-books.  Under the current e-books VAT rules for the EU many global e-book providers, notably Amazon Kindle, relocated to Luxembourg.  This enabled them to charge only 3% Luxembourg reduced VAT on their e-book sales to consumers in any country in the EU.  However, this loophole in EU law closes on 1 January 2015 with the new MOSS electronic services to B2C rules.

In the meantime, the European Commission has been insisting the EU VAT Directive does not permit e-books to benefit from the reduced VAT rates.  It has taken France and Luxembourg to the European Court of Justice to force them to raise their rates to the standard VAT rates.  However, a recent ECJ ruling for Finland indicated that reduced rates may be permitted in related book services (memory sticks and CDs etc).

This has encouraged the Italians to cut their rates now.  The House Budget Committee approved the Ministerial pledge, which will cost Euro7.2m per year.

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