France referred to European Court of Justice for reduced VAT on ebooks

The European Commission has referred last week France to the European Court of Justice (ECJ) regarding its charging a reduced VAT rate on the sale of ebooks. The EC is seeking a full Preliminary Ruling on the breach of the EU VAT rules by France.

This follows the apparent failure of the EU to reach an agreement of lowering VAT on ebooks last month.

Printed books generally attract a reduced or nil VAT rate, in accordance with the EU VAT Directive.  However, this was caste prior to the emergence of digital books.  Countries diverge on their treatment of ebooks for VAT - countries such as Germany and the UK apply their full VAT rates.  But countries like France and Luxembourg charge reduced rates.

In particular, Luxembourg charges 3% on ebooks since the start of 2012.  Luxembourg is the European home of Amazon, which can therefore only charge 3% VAT on ebook sales to consumers in any EU country.  The leaves ebook sellers in countries like the UK at a disadvantage.

For several years, the finance ministers of countries like the UK have put pressure on the EC to bring Luxembourg and France into line.  In 2012 the EC gave France and Luxembourg 30 days to change their ebook VAT rates.  This latest announcement last week confirms that a full Preliminary Ruling is being sought on France.  If successful, France will have no alternative but to change its VAT treatment.

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