The European Commission (EC) has announced that it is investigating possible infringements by France and Luxembourg regarding ebook VAT rates. At issue is the question of whether the two countries were entitled to reduce ebook VAT rates to 7% (France) and 3% (Luxembourg) at the start of 2012.
Annex III of the VAT Directive permits countries to reduce VAT rates only for a limited number of goods. This includes “supply, including on loan by libraries, of books” but not specifically ebooks. The VAT Directive doesn’t explicitly include or exclude ebooks, so at issue is the question of how the current rules should be interpreted and what changes (if any) should be introduced. The EC has indicated a desire to move forward with discussion on a harmonised VAT rate for both printed and digital books, but France and Luxembourg are being accused of jumping the gun and introducing their own reductions. This might be contrary to EU law.
France and Luxembourg have one month to submit statements explaining their positions, after which the EC will decide whether or not to move forward with a formal request for the two countries to change their laws. Other EU countries will undoubtedly be watching carefully to see what precedent is set.