Electronic publications: European Council adopts reform allowing reduced VAT rates

On 6 November 2018, the Council adopted a directive allowing alignment of VAT rules for electronic and physical publications. From now on, member states will be able to apply reduced, super-reduced or zero VAT rates also to electronic publications.

The adoption of the e-publication directive follows the political agreement reached by the Council on 2 October. It opens up the possibility for member states to implement reduced VAT rates in their national law if they wish to do so.

Under the current VAT rules (directive 2006/112/EC), electronically supplied services are taxed at the standard VAT rate, i.e. minimum 15%, whereas publications on a physical support may benefit from non-standard rates.

A reduced VAT rate

For physical publications – books, newspapers and periodicals – member states currently have the option of applying a ‘reduced’ VAT rate, i.e. minimum 5%. Some have been authorised to apply ‘super-reduced’ VAT rates (below 5%) or ‘zero’ rates (which involve VAT deductibility).

The directive will allow member states that so wish to apply reduced VAT rates to electronic publications as well. Super-reduced and zero rates will only be allowed for member states that currently apply them to ‘physical’ publications.

The new rules will apply temporarily, pending the introduction of a new, ‘definitive’ VAT system. The Commission has issued proposals for the new system, which would allow member states more flexibility than at present in setting VAT rates.

Click here to access the text of the directive as agreed.