Flashback on ECJ cases C-479/13 (Commission vs. FR) – Reduced rate of VAT of 5.5 percent on electronic books, in contrast with paper books, is not compatible with the EU law

On March 5, 2015, the ECJ issues his decision on the case C-479/13 Commission vs. France related to the VAT rate applicable to electronic books

Article in the EU VAT Directive

Article 96 and 98(2), Annex III, category 6 of the EU VAT directive 2006/112/EC

Article 96
Member States shall apply a standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services.

Article 98
1. Member States may apply either one or two reduced rates.
2. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III. The reduced rates shall not apply to electronically supplied services.
3. When applying the reduced rates provided for in paragraph 1 to categories of goods, Member States may use the Combined Nomenclature to establish the precise coverage of the category concerned.

Annex III
List of Supplies of Goods and Services to which the Reduced Rates referred to in article 98 may be applied
(6) supply, including on loan by libraries, of books on all physical means of support (including brochures, leaflets and similar printed matter, children’s picture, drawing or colouring books, music printed or in manuscript form, maps and hydrographic or similar charts), newspapers and periodicals, other than material wholly or predominantly devoted to advertising;

Facts

Questions

The Commission raises a single plea in law in support of its action, alleging that, by subjecting the supply of electronic books to a super-reduced rate of 7% from 1 January 2012, then of 5.5% from 1 January 2013, the national legislation is not compatible with the VAT directive.

The Commission claims that under the first subparagraph of Article 98(2) of the VAT directive, reduced rates of VAT may be applied only to the supplies of goods and services referred to in Annex III to that directive. Category 6 of Annex III to the VAT directive does not mention the supply of digital books as being capable of being subject to a reduced rate of VAT. The Commission infers from that that the supply of electronic books must therefore be subject to the normal rate of VAT in accordance with Article 96 of the VAT directive. That is also confirmed, according to the Commission, by the second subparagraph of Article 98(2), which explicitly excludes electronically supplied services from the benefit of reduced rates of VAT. Finally, in support of its action, the Commission claims that the VAT Committee unanimously adopted, on 9 February 2011, guidelines according to which reduced rates of VAT do not apply to the supply of digital books.

AG Opinion

None

Decision

1. Declares that, by applying a reduced rate of value added tax to the supply of digital or electronic books, the French Republic has failed to fulfil its obligations under Articles 96 and 98 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax as amended by Council Directive 2010/88/EU of 7 December 2010, read in conjunction with Annexes II and III to that directive and Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC;

2. Orders the French Republic to bear its own costs and to pay those incurred by the European Commission;

3. Orders the Kingdom of Belgium to bear its own costs.

Personal comments/VATupdate

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