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Europe details case against Luxembourg ebooks VAT rates

  • VAT
  • 08 December 2013 | Richard Asquith

Europe details case against Luxembourg ebooks VAT rates

The European Commission has clarified the case it is seeking to bring against Luxembourg for charging 3% on ebooks sold online to consumers.  This will impact large online ebook retailers, such as Amazon, which are able to sell to any consumers across the EU at much lower rates than their countries.

Two counts of breaching the EU VAT Directive

The details of the referral of Luxembourg is based on two points of law:

  1. There is no provision within the EU VAT Directive to levy reduced VAT rates on digital books.  It is provided for for printed books, but it would require a unanimous vote by the 28 member states of the EU to harmonise this treatment.  It is widely believed that the UK and Germany are against this.
  2. Under the conditions of the EU VAT Directive Article 99, member states may only have two reduced VAT rates (plus zero rated goods), and the lower of the two rates cannot be below 5%.  Luxembourg VAT is currently charging 3% on e-books.

The EC originally warned France and Luxembourg to raise their ebook VAT rates in October 2012.  It gave both countries 30 days to raise their reduced rates on ebooks (3% and 7% respectively)  to their national standard rates.  Following both countries taking no actions, the EC proceeded with a referral to the European Court of Justice.  France was referred to the ECJ on ebook VAT in November 2013.

The above situation will change with the 2015 EU VAT Package.  This will shift the 'place of supply' for VAT purposes on digital products (such as ebooks, downloads of films or games etc) to where the consumer is based.  This will mean that the large online retailer will no longer be able to charge the favorable rates of Luxembourg.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.