Germany may cut VAT rate on ebooks to 7%

  • Apr 30, 2014 | Richard Asquith

Germany may cut VAT rate on ebooks to 7%

German VAT on ebooks may be about to drop from the standard German VAT rate of 19% down to the reduced 7% rate. This would come despite opposition from the European Commission (EC) on reduced VAT on digital book. There are already a number of court cases lodged with the European Court of Justice concerning France, Luxembourg and Finland.

German VAT reduction on digital print

The proposal for a reduction of the German digital tax come from the Ministry of Culture. It is keen to promote the use of online books, and for them to enjoy the same reduced 7% rate as print books do. Any change would ideally come through the auspicious of the EU, but Germany may follow the lead of other countries and make the change

EC seeks to block reduced VAT on ebooks

The EU VAT Directive does permit reduced VAT rates for print books. However, it never considered the case for digital books. Countries therefore have no right to equalise the digital book rate down to the print book rates.

However, Luxembourg has a 3% VAT rate on ebooks, which has encouraged major ebook providers to locate their EU headquarters there, e.g. Amazon. This enables the companies to only charge the 3% VAT rate to any consumer around Europe. However, this loophole in EU VAT will be closed on 1 January under B2C digital services VAT reform 2015.

But the EC is pursuing Luxembourg and France for their use reduced VAT on ebooks. Finland has also referred its views to the Court, and asked for clarification.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara