Background
Further to my article on the ongoing issue of e-books, in October 2018, the European Council (EC) agreed to allow Member States to apply reduced VAT rates to electronic publications (eg; e-books and e-newspapers) thereby allowing alignment of VAT rates for electronic and physical publications. The reasoning was for the EC to modernise VAT for the digital economy, and to keep pace with technological progress.
Under Directive 2006/112/EC, electronically supplied services are taxed at the standard VAT rate, whereas physical publications of the dead tree variety; books, newspapers and periodicals, benefit from non-standard rates in many Member States – these goods being zero rated in the UK and around 5% or below in other countries.
Amendments to the Directive allowed Member States to apply reduced VAT rates to electronic publications as well. Super-reduced and zero rates will only be allowed for Member States that currently apply them to physical publications.
The new rules will apply temporarily, pending the introduction of a new, ‘definitive’ VAT system. The EC has issued proposals for the new system, which would allow member states more flexibility than at present in setting VAT rates.
New rates
Some Member States have now introduced reduced rates:
Austria 10%, from 1 January 2020
Belgium 6%, from 1 April 2019
Croatia 5%, from 1 January 2019
Czech Republic new 10% rate from 1 May 2020
Finland: 10% from 1 July 2019
Germany 7%, from 1 January 2020
Ireland 9%, from 1 January 2019
Luxembourg 3%, from 1 May 2019
Malta 5%, from 1 January 2019
The Netherlands 9%, from 1 January 2020
Poland 5%, from 1 November 2019
Portugal 6%, from 1 January 2019
Slovenia 5% from 1 January 2020
Sweden: 6%, from 1 July 2019
It is anticipated that the remaining Member States are likely to introduce reduced rates in the future. The UK, being subject to Brexit, is in a more complicated position. If the UK brought e-publications in line with the VAT treatment of physical publications, it would apply the zero rate. However, the current EU legislation prevents any introduction of new zero rating. As matters stand, the UK may only apply the zero rate after an exit from the EU.
Watch this space…