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Malta reduces VAT on e-books from 18% to 5% in 2015

  • Nov 3, 2014 | Richard Asquith

Malta reduces VAT on e-books from 18% to 5% in 2015

Malta has become the latest EU member state to reduce the VAT rate on e-books, and harmonise it to the same 5% reduced VAT rate it applies to printed books. The reclassification from the standard Malta VAT rate of 18% to the reduced rate comes on 1 January 2015.

Italy announced plans to cuts e-book VAT to 4% recently. The European Commission has attempt to block similar cuts by France and Luxembourg.

2015 B2C electronic services MOSS changes

Malta’s move coincides with the 2015 B2C changes to EU VAT on electronic services. This means that the providers of e-books will no longer charge the VAT rate of the country where they are located, and instead charge the rate of where any of their EU consumers are resident. Since most e-books sellers (including Amazon Kindle) based themselves in Luxembourg to enable them to apply Luxembourg’s 3% VAT rate on e-books to all EU consumers, this will mean a substantial rise in e-book prices as most other EU states charge the standard VAT rate on e-books – including UK and Germany at 20% and 19%, respectively.

France and Luxembourg are the only other countries with reduced VAT rates on e-books. The European Commission has attempted to prosecute them for this since the EU VAT Directive does not permit a reduced VAT rate on e-books. However, a resent ECJ case on e-books involving Finland has given member states the right to harmonise e-book rates with printed book rates.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara