New low VAT rate for digital books, newspapers and periodicals in EU

[blockchain4ever]

Can this new legislation be useful? Can income from blogs, random websites etc. now be VAT free by modifying the business structure somewhat?

According to Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (hereinafter 'the VAT Directive') electronically supplied services including electronically supplied publications (hereinafter 'e-publications') have to be taxed at the standard VAT rate (minimum 15%). On the other hand, Member States have the option to tax publications on any means of physical support at a reduced VAT rate (minimum 5%) and some Member States were granted the possibility to continue to apply VAT rates lower than the current minimum of 5% (super-reduced rates) including exemptions with the deductibility of the VAT paid at the preceding stage (so called zero rates) to certain printed publications.

The VAT Directive prevents Member States from applying the same VAT rates to
e-publications as they currently apply to physical publications and the result is a markedly less favourable VAT treatment of e-publications in most Member States. While acknowledging the differences between printed publications and e-publications with regard to the format, they offer the same reading content for consumers.

Since 1 January 2015, with the entry into force of new "place of supply" rules, a harmonisation of VAT rates for electronically supplied services and in particular electronically supplied publications is no longer a requirement. VAT is since then levied, where the customer is based and suppliers can no longer benefit from being located in Member States with the lowest VAT rates.

As stated in the Commission's Action Plan on VAT 1 the current rules on VAT rates do not fully take into account technological and economic developments with regard to e-books and electronic newspapers. Modernising VAT for the digital economy is also a key objective of the Digital Single Market Strategy 2 .

In its conclusions of 25 May 2016 on the Action Plan on VAT the Council invited the Commission to present a legislative proposal which integrates provisions concerning VAT rates for e-publications in the context of Digital Single Market initiatives by the end of 2016 and include an impact assessment.

In line with the Council conclusions and the commitment in its 2016 Action Plan on VAT, the Commission proposes to grant all Member States, the possibility to apply the same VAT rates to electronically supplied publications as Member States currently apply to printed publications, which include reduced, super-reduced and zero rates. ​

EUR-Lex - 52016PC0758 - EN - EUR-Lex

 

[blockchain4ever]

In order to enable Member States to harmonise the VAT rate treatment of e-publications with the treatment of printed publications and publications on all physical means of support, three amendments of the VAT Directive are required:

1. Amending Annex III

Under point 6 of Annex III references to "all physical means of support" and to specific formats for printed publications "(brochures, leaflets and similar printed matter, children’s picture, drawing or colouring books, music printed or in manuscript form, maps and hydrographic or similar charts)" will be deleted and the condition "other than publications wholly or predominantly consisting of music or video content" will be introduced.

2. Amending Article 98

Under the current Directive all electronically supplied services have to be taxed under the standard VAT rate to which an exception for electronically supplied publications is introduced.

3. Amending Article 99

A paragraph 3 is added to Article 99 to allow Member States to apply reduced rates lower than the minimum laid down in this Article or to grant exemptions with deductibility of the VAT paid at the preceding stage to the supply of the goods and services mentioned under the amended point 6 of Annex III.

Striking out the references to format and referring in general to books, newspapers and periodicals is a requirement to cover as well e-publications and Member States would be able to continue to restrict the application of reduced rates to certain books, newspapers and periodicals, e.g. by excluding specific formats or content.

The supply of pure music and video content would continue to be taxed at the standard VAT rate, as would publications that predominantly consist of music and video content. Member States would have the discretion to specify the term "predominantly" in their national VAT law. This solution would also allow Member States to continue to apply a reduced rate for audio books, audio newspapers and periodicals for people with sight loss.

This proposal does not put forward any EU level definition of the terms book, newspaper and periodical at EU level. E-publications are evolving and any specific definition of what is a book, newspaper or periodical risks being outdated within a short time. Given the unanimity requirement for EU legislation in tax matters, Member States are generally able to adapt the rules to future needs in a more timely fashion than the EU could.

The third amendment of the VAT Directive acknowledges the fact that several Member States were granted derogations and apply rates lower than reduced rates (including zero rates) to certain printed publications. The possibility to apply an additional reduced rates lower than the current minimum of 5% or granting exemptions with deductibility of the VAT paid at the preceding stage to the supply of books, newspaper and periodicals will be granted to all Member States, so as to enable them to align VAT rates for e-publications with the VAT currently in force for printed publications.
​

 

[countryfree]

Well, if you're a European with a website monetized with google adsense, or if you make money on youtube, this doesn't change everything as the VAT is paid by Google in Ireland (unless of course, you're an Irish resident).

I've tried to sell e-books a few years ago (payment via Paypal), and I may do it again, but I'm not planning to bother with VAT at all.