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GRT100456
Summary To some extent, the Court's
ruling is of historic interest only
given that the supply of
'electronic services' to consumers
are now taxed in the Member
State of consumption. However,
the judgments clarify two major
points. Firstly that the supply of
e-books is regarded by the CJEU
as the supply of an electronic
service and, secondly, that as a
consequence, the principle of
fiscal neutrality is not breached if
Member States treat physical
books differently to e-books for
VAT purposes.
It also seems clear that any hopes
of obtaining zero-rating for e-
books in the UK are forlorn.
5 March 2015
End of the road for reduced rates for e-books?
The Court of Justice of the European Union (CJEU) has given judgment in the
infraction proceedings brought by the European Commission against France and
Luxembourg and has ruled that the supply of an e-book (a book delivered
electronically) is a supply of an electronic service and cannot, therefore, benefit from
the application of a reduced rate of VAT.
For many years, both France and Luxembourg have applied a reduced rate of 3%
to the supply of e-books. In the proceedings, they argued that Annex III of the
VAT Directive – which permits the application of reduced rates to the ‘supply of
books ... on all physical means of support’ – gave them the legal authority to apply
a reduced rate. However, the Commission argued – and the CJEU has agreed, -
that, in the case of e-books, there is no physical means of support. An e-book is
downloaded to, but is not supplied with a physical means of support.
The CJEU confirmed that, in determining the scope of a provision of EU law, its
wording, context and objectives must all be taken into account. In doing so, it
concluded that the VAT Directive does not permit the application of a reduced
rate to the supply of e-books. The supply of an e-book by itself without any
physical means of support (such as an e-reader or computer) is not a supply of a
book but is a supply of electronic services. By applying a reduced rate, both France
and Luxembourg have has failed to fulfil their respective obligations under
Articles 96 and 98 of the VAT Directive.
By these judgments, the CJEU has confirmed that the sale of physical books and
e-books are different – one being the supply of goods and the other a supply of
services. As such, they can legitimately be treated differently for VAT purposes
without any infringement of the principle of fiscal neutrality.
European Commission v France & Luxembourg
e-books are supplies of services not goods
Case Alert
Contact Stuart Brodie Scotland [email protected] (0)14 1223 0683
Karen Robb London & South East [email protected] (0)20 772 82556
Richard Gilroy London & South East [email protected] (0)20 7728 3170
