VAT on E-Books

The European Court of Justice (ECJ) has once again confirmed that a reduced rate of VAT on e-books is not allowed and that Member States must continue applying the full VAT rate on the sale of e-books. The case against Poland (C-390/15) looked at whether the discrepancy in VAT treatment between physical books and e-books […]

Written By Stephen Balzan

On April 17, 2017
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The European Court of Justice (ECJ) has once again confirmed that a reduced rate of VAT on e-books is not allowed and that Member States must continue applying the full VAT rate on the sale of e-books.

The case against Poland (C-390/15) looked at whether the discrepancy in VAT treatment between physical books and e-books is justified.  Physical books are subject to a reduced rate of VAT in EU member states.  On the other hand, e-books are classified as services rather than goods under the VAT directive.  Therefore, the reduced rate of VAT cannot be applied on the sale of such books as such are considered to be supplies of electronic services and thus the tax treatment is different from the sale of physical books.

The ECJ in its judgment points out that a difference in treatment is justified where it relates to a legally permitted objective pursued by the measure having the effect of establishing the difference and is proportionate to that difference.  In a press release issued by the ECJ, the Court observes that the ruling out of the application of a reduced rate of vat to the supply of digital books electronically is the consequence of the specific VAT regime for e-commerce.

The statement continued that in the light of the constant developments to which electronic services are in their entirety subject, it was considered necessary to make electronic services subject to clear, simple and uniform rules in order that the VAT rule applicable to them may be established with certainty and, thus, that the administration of VAT by taxable person and tax authorities is facilitated.  The ECJ wanted to create a line between services and goods and creating exceptions would over complicate the system.

For physical and e-books to be treated in the same manner for VAT purposes, it is necessary to change the directive, and as a matter of fact the Commission has already initiated a process to amend the Directive.

In Malta, the supply of printed matter is subject to a reduced rate of VAT of 5% in terms of the 8th Schedule of the Maltese VAT Act.  Electronically Supplied Services (ESS) on the other hand are specifically excluded from the application of the reduced rate of VAT.  ESS are regulated by Part 7 of the 14th schedule of the law.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected]. 

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