Global

Details

  • Service: Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 7/6/2012

European Union - VAT on digital books in France, Luxembourg 

July 6:  The European Commission announced that it has initiated an infringement procedure against France and Luxembourg given the reduced rates of value added tax (VAT) on digital books are potentially incompatible with EU law.

As noted in the EC release (IP/12/740, 3 July 2012), EU law allows EU Member States to apply reduced VAT rates to a limited list of goods and services. Downloading of digital books is regarded as a service supplied electronically, which is not included in this list and cannot therefore be taxed at the reduced rate.


In December 2011, the EC began to consider the possibility of moving towards convergence of the VAT rates applicable to traditional books and digital books. Proposals are expected by the end of 2013.


Nevertheless, France and Luxembourg decided to apply reduced rates to digital books as of 1 January 2012, thereby infringing EU law. The rates are 7% for France and 3% for Luxembourg.


The EC has decided to send letters of formal notice to both France and Luxembourg. This first stage allows the two countries to explain their positions. France and Luxembourg have one month to submit their comments. If the information provided is not regarded as sufficient, the EC could formally state that there has been an infringement and send a reasoned opinion to the two countries asking them to change their laws, which is the second stage of the infringement procedure.


Read a July 2012 report [PDF 57 KB] prepared by the KPMG member firm in Luxembourg: Reduced VAT rate on e-books incompatible with EU law




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