Saturday

20th Jan 2018

Focus

EU's new VAT rules likely to make ebooks cheaper

  • Under the current EU rules, member states are not allowed to apply reduced VAT rates to ebooks and digital newspapers. The commission proposes to change that (Photo: Michael Mol)

The European Commission is proposing to let member states reduce the rates of value added tax (VAT) on digital books and newspapers.

Under the current EU rules, member states are only allowed to apply reduced VAT rates to physical books and newspapers.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Ansip (c): Current VAT system is 'major headache' (Photo: European Commission)

Luxembourg and France had introduced reduced rates for ebooks, but were scolded by the EU's Court of Justice last year. The court ruled that under the current EU rules it was illegal for them to have done so.

The ruling was “a message for us to intervene”, said European commissioner for digital single market, Andrus Ansip, who informed journalists about the new plans last Friday (25 November).

He spoke on the condition that stories would not be published before the official announcement on Thursday (1 December).

If the proposal is adopted, member states would be allowed to have reduced rates for ebooks and digital newspapers, if they wanted to.

“We would not push Denmark to introduce reduced rates if they don't want to use those rates,” said Ansip. Only Denmark and Bulgaria do not have reduced VAT rates for physical books.

The measure is part of a broader VAT reform.

'Headache'

The EU's executive wants to make it easier for small European companies to sell their goods to customers in another EU member state.

“The existing VAT system is a major headache for our businesses,” said Ansip.

“It is very complicated for them to register their activities in all the member states they are selling some goods or services.”

As an example, the Estonian commissioner noted that a company selling through the Internet across the EU could, in theory, be audited by 28 different tax departments.

“For small companies the message is clear: stay at home. Too complicated to deal with 28 different auditors,” he said.

The commission is proposing that the tax department of the country where the company is located should be the one responsible.

“Others, they have to trust,” said Ansip.

Such a system of mutual recognition exists already in various fields, for example product certification.

The recent VW emissions scandal highlighted that such systems could only be as strong as their weakest link, however.

The commission claims that through simplification of the rules, EU businesses will save around €2.3 billion due to reduced administrative burdens.

Fiscal advantage to non-EU companies

Ansip also proposes to annul a VAT exemption for non-EU companies.

Currently, products that are imported into the EU are free from VAT if the value is below a certain threshold, in most EU countries that value is €22.

“It's very bad for European companies, because this is not a level playing field,” said Ansip.

According to a 2015 study by the EY accountancy firm, ordered by the EU commission, the exemption “has caused a competitive distortion in which trade from outside the EU is given a fiscal advantage”.

The consultancy firm found that the volume of packages receiving the advantage had increased from around 30 million in 1999 to 115 million in 2013.

“This growth in postal volumes is in line with the increase of individuals shopping online in the EU,” the EY report said. It calculated that the level of lost VAT income grew from €118 million in 1999 to €535 million in 2013.

With the rising popularity of ordering cheap goods from countries like China, the commission thinks the time has come to abolish the rule.

“When this exemption was introduced, we practically didn't have e-commerce,” said Ansip, while stressing that the measure was not aimed at specific companies.

EU commission takes on VAT fraud

Under an action plan presented Thursday, cross-border transactions would be better monitored. EU countries would also have more autonomy to fix rates.

Row between EU ministers halts e-book tax rate

A bill to reduce VAT rates on e-books and e-publications has become the latest victim of a row between the Czech Republic and its partners over its own plan to collect VAT.

EU takes step towards free flow of data

Non-personal data should be allowed to cross EU borders without restrictions, with an exemption for security reasons, diplomats meeting in the Council of the EU have agreed.

Uber is a transport service, EU court rules

Ruling means that national governments have the right to demand that Uber drivers request the same permits and authorisations required of taxi drivers.

News in Brief

  1. Germany confirms attendance at air quality summit
  2. Nearly half of 'fixed' Dieselgate cars show problems
  3. YouTube, Twitter, Facebook up hate speech deletion
  4. UK mulls bridge to France
  5. German far-right float anti-asylum bill
  6. EU Parliament to investigate glyphosate-decision process
  7. 'Mutagenesis' falls outside EU's GMO rules, says EU top lawyer
  8. Decision on Polish MEP's Nazi-era slur postponed

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  2. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  3. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  4. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  5. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  6. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  7. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  8. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  9. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  10. ACCAWelcomes the Start of the New Bulgarian Presidency
  11. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  12. EU2017EEVAT on Electronic Commerce: New Rules Adopted

Latest News

  1. Middle East, Messi and missing MEPs on the agenda This WEEK
  2. Instagram and Google Plus join EU anti-hate speech drive
  3. EU wants 'entrepreneurship' in education systems
  4. UK loses EU satellite centre to Spain
  5. Pay into EU budget for market access, Macron tells May
  6. Ethiopian regime to get EU migrants' names
  7. EU to lend Greece up to €7bn more next week
  8. Nato prepares to take in Macedonia

Stakeholders' Highlights

  1. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  2. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  3. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  4. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  5. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  6. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  7. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  8. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  9. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  10. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  11. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  12. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap