VAT rate on electronic publications

Date: 2022-12-21

Number: 8-2071393

1 Summary

Publications such as books and newspapers are subject to the tax rate of 6 percent when they are provided electronically. This applies if the publication is not entirely or mainly devoted to advertising. It must also not consist entirely or mainly of moving images or audible music.

A prerequisite for a product provided electronically to be covered by the reduced tax rate is that it mainly corresponds to such publications in physical form as referred to in ch. 7. Section 1 third paragraph 1-4 of the Value Added Tax Act (1994:200), ML. Decisive for the assessment of whether a product mainly corresponds to a publication in physical form is the product’s content, function and area of use. If the content or functions cause the product to have an extended area of use or a completely different area of use than what a publication in physical form could have, it is not covered by the reduced tax rate.

The Swedish Tax Agency considers that a publication provided electronically is mainly devoted to advertising when its content consists of at least 75 percent advertising. For publications containing text intended for reading, e.g. articles, as well as advertisements, an assessment must be made based on how much of the visual surface constitutes advertising in relation to the other parts of the publication. If the publication contains another form of advertising such as a pop-up window, i.e. a window that appears in front of other windows, an assessment must be made based on how much and how often the average consumer is exposed to all advertising in relation to the other parts of the publication.

If a publication provided electronically contains text as well as moving images or audible music, an assessment must be made as to whether the publication mainly consists of moving images or audible music. Consideration must then be given to the significance of the various parts for an average consumer. If the text in a publication is only a means for the customer to be able to make the best use of the moving image or the audible music, the publication is not covered by the reduced tax rate.

This position statement replaces the position statement from June 3, 2020 with the same name, dnr 202 251398-19/111. The previous position has been revised due to the fact that the Supreme Administrative Court in a judgment on 17 September 2021, HFD 2021 ref. 51, has stated that certain educational materials provided electronically are subject to the reduced tax rate. The new position means a substantive change in terms of what is required for a product to be considered to have the same field of use as a publication could have in physical form. Due to a judgment from the Supreme Administrative Court on 15 June 2022, HFD 2022 ref. 27, the new position also contains a clarification regarding products intended for listening. In addition, the examples have been removed. If necessary, clarifying examples will be made on Legal guidance.

2 Question

Taking into account the legal developments that have taken place, the Swedish Tax Agency gives its view on which electronic publications are covered by the reduced tax rate of 6 percent.

3 Applicable law, etc

3.1 Provisions

Value added tax is levied at 25 percent of the taxable base, unless otherwise specified in the Value Added Tax Act (chapter 7, section 1, first paragraph ML).

Value added tax is levied at 6 percent for e.g. sale of the following goods, provided that the goods are not wholly or mainly devoted to advertising:

books, brochures, booklets and similar articles, including in the form of single sheets,
newspapers and magazines,
picture books, drawing books and coloring books for children,
musical notes, as well
maps, including atlases, wall maps and topographical maps (chapter 7 § 1 third paragraph 1 ML).

Value added tax is levied at 6 percent for e.g. sales of programs and catalogs for the following activities, provided that they are not wholly or mainly devoted to advertising:

admission to concerts, circus, theatre, opera or ballet performances or other comparable performances
services referred to in ch. 3 § 11 § 2 and 4 ML, if the activity is not carried out by, nor continuously to a more than small extent supported by the public
admission to and viewing of zoos
demonstration of natural areas outside built-up areas as well as of national parks, nature reserves and national city parks and Natura 2000 areas
services in the field of sports as specified in ch. 3. 11 a section first paragraph ML and which are not exempted from tax liability according to the second paragraph of the same section (ch. 7 § 1 third paragraph 2 ML).

Value added tax is levied at 6 percent for sales other than for own business, of programs and catalogs, for business that does not in itself entail tax liability or the right to a refund according to ch. 10. §§ 9-11 ML on condition that they are not wholly or mainly devoted to advertising (chap. 7 § 1 third paragraph 2 and 3 ch. 18 § ML).

Value added tax is levied at 6 percent on sales of radio magazines and on i.a. sales of cassette newspapers, unless otherwise follows from ch. 3. § 17, and of cassettes or any other technical medium that reproduces a reading of the contents of an item covered by 1 (ch. 7 § 1 third paragraph 3 ML).

Value added tax is levied at 6 percent for e.g. sale of a product that, through sign language, braille or other such special method, makes writing or other information accessible especially to people with reading disabilities, unless otherwise follows from ch. 3. § 4 (Chapter 7, § 1, third paragraph, 4 ML).

Value added tax is levied at 6 percent on sales of such products as referred to in 1-4 if they

provided electronically,
are not wholly or mainly devoted to advertising, and
does not consist entirely or mainly of moving images or audible music (ch. 7 § 1 third paragraph 5 ML).

Member States may apply one or two reduced rates to the supply of goods and services in the categories listed in Annex III (Article 98 of Council Directive 2006/112/EC on a common system of VAT, VAT Directive).

Reduced rate may be applied to the supply, including loan from libraries, of books, newspapers and periodicals, either on physical media or by electronic means or both (including brochures, leaflets and similar printed matter, picture, drawing and coloring books for children, sheet music in prints or manuscripts, maps and hydrographic and similar maps), except for publications wholly or mainly devoted to advertising and publications consisting wholly or mainly of video content or audible music (point 6 of Annex III of the VAT Directive).

3.2 Preparatory works

A provision of products by electronic means, in contrast to the provision of a printed product, constitutes the provision of services. This means that the product’s physical properties cannot be used when defining the scope of application. Decisive for whether a certain provision should be covered by the new provision should therefore be the service’s area of use, content and function. Therefore, for a product provided electronically to be covered by the new provision, its scope of use should be substantially the same as that of a corresponding printed product. This means that if a product provided electronically has a field of use that mainly corresponds to the field of use that any of the publications specified in points 1-4 of the provision could have in printed format, should that product be subject to the reduced tax rate. An electronic publication therefore does not have to have a printed publication as a model in order to be covered by the reduced tax rate. If, on the other hand, a product provided electronically has content and functions that result in it having a different or significantly larger area of use than any of the publications specified in points 1-4 could have in printed format, it is not covered by the reduced the tax rate. It can be a product that is combined with other services so that it e.g. essentially consists of games or services that are based on a varied interaction between the computer and the user. Such products show differences that do not primarily follow from the fact that the supply takes place electronically and should therefore not be covered by the reduced tax rate (prop.

The provision shall only cover products that correspond to such printed publications that are currently taxed at the reduced tax rate. The starting point for this assessment should be the product’s content. For each individual product, an assessment must be made as to whether its main area of use is the same as for a corresponding printed product. This assessment must take into account the significance of the various parts of the publication in question for the average consumer of the product in question. If e.g. the text of the moving image or the audible music is only a means of making the best use of the moving image or the audible music, the publication is not covered by the reduced tax rate. The main part in such a case consists of the moving image or the audible music. The fact that different products have the same purpose does not mean that they have the same area of use. A film e.g. may have the purpose of teaching a student history but it does not have the same scope of use as a printed or digital textbook even if the purpose is the same. A film cannot be covered by the provision because it consists entirely of moving images. According to the government’s opinion, it is therefore i.a. the product’s actual content to be assessed and not its purpose. Against the background of the wording of the directive, the government considers that the main assessment must aim at these parts separately in such a way that the part consisting of advertising must be assessed in relation to the entire electronic publication and the part consisting of moving images or music in relation to the entire electronic the publication (prop. 2018/19:73, p. 15).

Maps that are combined with a navigation system such as can suggest different travel routes and provide information about the traffic situation may be considered to have a different use than the maps referred to in point 1 of this paragraph. There may also be other products that are currently taxed at the reduced tax rate but which, when supplied electronically, take on a different character and function so that it e.g. is considered a game and therefore falls outside the scope of this clause. Databases that address certain professional categories and consist of e.g. books and other reference material, on the other hand, should, as a starting point, be considered to have the same area of use as corresponding printed products (prop. 2018/19:73, p. 21 f.).

What can be assumed to be included in the concept of video content is covered in all parts of the concept of moving image. Video content can thus be nothing more or anything other than a moving image. There is therefore no risk of any demarcation or application problems arising in relation to e.g. a possible interpretation in the EU Court of the concept of video content. The reason why moving images should be used is to more clearly define the scope of application. In addition to video clips, e.g. movies, live news and other types of television programs with or without sound. This applies regardless of whether these would be considered video content or not (prop. 2018/19:73, pp. 13 and 21).

3.3 Case law

Concepts included in the description of the goods and services for which a reduced tax rate may be applied must be interpreted restrictively because this possibility is a deviation from the principle that the normal tax rate must be applied (among others C-3/09, Erotic Center, point 15).

The starting point for the assessment of whether a digital product corresponds to a printed publication that is taxed at the reduced tax rate is the product’s content. For each individual product, an assessment must be made as to whether its main area of use is the same as for a corresponding printed product. In this assessment, account must be taken of the significance of the various parts of the publication in question for the average consumer of the product in question (prop. 2018/19:73 p. 15). The digital learning materials covered by the application consist for the most part of text for reading and of functions that could have been found in a corresponding physical publication or that are a consequence of the electronic provision. This may be considered to be of primary importance to students and teachers. Against this background, the additional functions in the form of message possibilities and the teacher’s possibilities for digital follow-up cannot be considered to mean that the teaching materials get a different or significantly larger area of use than the corresponding printed products could have. The provision of licenses for the learning materials in question thus constitutes sales of books provided electronically and is therefore covered by the reduced tax rate (HFD 2021 ref. 51, paragraphs 20-22).

A prerequisite for a digital product in the form of audio files to be covered by the reduced tax rate should be that the audio files contain reproductions of texts. By using an audio file, the customer should thus be able to assimilate a text, not by reading it but by listening to it. It follows from this that the presentation on the audio file must be scripted. It is not necessary for the script to be in printed form, but a performance consisting of one or two people speaking freely without a script does not reproduce an existing text and is not covered by the reduced tax rate. The company’s subscription consists of the reading of texts. In some cases, the reading has been enhanced with elements of dialogue, sound effects, music, etc. However, the fact that a reading is dramatized in these ways does not prevent it from being just a reading of text. These parts of the subscription may therefore in and of themselves be considered such submissions that are covered by the reduced tax rate for electronic publications. However, the company’s subscription also includes audio files containing interviews and conversations. These are not scripted, but the dialogue takes place spontaneously, let alone on the basis of certain pre-determined questions. In these parts, there is no question of reading texts. The assessment should therefore not aim at whether an oral presentation could have been in written form or whether it can be subsequently recorded in writing, but whether the presentation consists of a reading of an already existing text. Since the subscription contains parts that are not covered by the reduced tax rate, that tax rate cannot be applied to the company’s provision (HFD 2022 ref. 27, paragraphs 19-22).

4 Assessment

The purpose of the introduction of a reduced tax rate on certain products that are provided electronically is that publications such as books, and newspapers must be taxed in the same way regardless of whether they are provided in physical or electronic form. A product is subject to the tax rate of 6 percent if it

are provided electronically and mainly correspond to such publications in physical form as referred to in ch. 7. § 1 third paragraph 1-4 ML,
not wholly or mainly devoted to advertising and
does not consist wholly or mainly of moving images or audible music.

A product provided electronically may contain both advertising and moving images or audible music. The part devoted to advertising must then be assessed in relation to the entire content of the publication, including any moving images or audible music (section 4.2). The part that consists of moving images or audible music must also be assessed in relation to the entire content of the publication, including any advertising (section 4.3). If the publication is entirely or mainly devoted to advertising or if it consists entirely or mainly of moving images or audible music, it is not covered by the reduced tax rate. An overall essentiality assessment for all its parts should therefore not be made.

4.1 Publication provided electronically

A product may be provided electronically, for example as a web page, through streaming or as a downloadable application or file. Such a product must be treated as a service for VAT purposes.

A prerequisite for a product provided electronically to be covered by the reduced tax rate is that the product mainly corresponds to such publications in physical form as referred to in ch. 7. § 1 third paragraph 1-4 ML. An electronic product that meets these requirements is referred to below as a publication.

There is no requirement that a publication provided electronically must also be available in physical form. It is sufficient that a printed equivalent of an electronic publication could exist. A product which mainly corresponds to publications in physical form but which is only provided as a downloadable file can thus be subject to the tax rate of 6 percent even if no physical copy exists.

Same field of use

A product mainly corresponds to a publication in physical form if the product has the same content, function and field of use as a publication could have in physical form. As a starting point, the product must contain text and be intended for actual reading or reading aloud, or alternatively loaded text or synthetic speech intended for listening. When the product is intended for listening, for example an audio file, it is required that the production is scripted. It must therefore be a question of reading an already existing text. However, the fact that a reading is dramatized does not prevent it from being a reading of a text. It is also not necessary for the script to be in printed form, but a performance consisting of one or more people speaking freely without a script does not reproduce an existing text.

An electronic product may contain functions that could be found in a corresponding physical publication and functions that are a consequence of the electronic provision. In order to be covered by the reduced tax rate, however, the product must not have an extended or different area of use than what a physical publication could have. Examples of functions that mean that the product has the same area of use are scrolling, linking between different parts, advanced search functions, translation of words and the ability to take notes. A product that can contain such functions is an information database whose content is taken from books and other reference material aimed at various professional groups. Even if the content of the product is continuously updated, it is comparable to a publication in physical form. A similar function is when the user is given the opportunity to interact with the product, e.g. that the product automatically asks questions that the user answers or that the user asks questions that the product automatically answers. This can, for example, be the case with game apps and linguistic glossary apps. Products that contain such functions thus have the same scope of use as a publication could have in physical form.

A product that mainly corresponds to a publication in physical form may, however, contain functions that could not be found in a corresponding physical publication or functions that are not a consequence of the electronic provision. Examples of such functions are when the user is given the option of sending messages or the option of digital follow-up. In this assessment, account must be taken of the significance of the various parts of the product for the average consumer. A publication that contains a small number of such functions can therefore be covered by the reduced tax rate. This applies under the condition that the product’s main area of use is the same as for a corresponding publication in physical form.

An extended or different area of use

If the content or functions mean that the product does not have mainly the same scope of use as a corresponding publication in physical form could have, the product is not covered by the reduced tax rate. An extended area of use or a completely different area of use means that the product does not correspond to a publication in physical form.

A product that contains a navigation system with a map and a text explaining how the navigation system works does not have the same scope of use as a map in physical form. The text is only a means to make the best use of the function in question. The differences that exist between such a product and a publication in physical form are not primarily due to the provision being made electronically, but to the fact that the areas of use differ. The same applies to products that mainly contain an opportunity for users to communicate with other users. The products are therefore not covered by the reduced tax rate.

4.2 Is entirely or mainly dedicated to advertising

A condition for the reduced tax rate to apply to a publication provided electronically is that it is not wholly or mainly devoted to advertising.

The concept of advertising is not defined either in ML or in the VAT Directive. Advertising in this context must be given a broad interpretation and must be interpreted in the same way regardless of whether the publication is provided in physical form or electronically.

The Swedish Tax Agency considers that the concept of advertising may be considered to include such content in a publication whose purpose is to promote the sale of goods and services. This applies regardless of whose sales are promoted by the content. Information and messages whose purpose is, for example, to make customers aware of a company’s existence, to get customers interested in the company, to create PR and goodwill for the company may also be considered advertising. It is also a matter of advertising when, for example, universities and health care centers describe the activities with the aim of getting students and care recipients to choose their services. The purpose of such content is to increase demand for the school’s or health center’s services.

With regard to programs and catalogs for the special activities specified in ch. 7. Section 1, third paragraph, 2 ML, however, does not count information relating to the special activities as advertising.

There are also products that essentially correspond to a single sheet that is provided electronically for a fee and that consists entirely of advertising. It could be an advertising agency that provides flyers electronically to a company that wants to advertise its goods or services. Such products are not covered by the reduced tax rate.

Books and magazines provided electronically for a fee are examples of publications that may partly consist of advertising. An assessment must then be made if the publication mainly consists of advertising. A publication provided electronically is mainly devoted to advertising when its content is at least 75 percent advertising.

For publications that contain text intended for reading, for example articles, and advertisements, an assessment must be made based on how much of the visual surface is advertising in relation to the other parts of the publication. If the publication contains another form of advertising such as a pop-up window, an assessment must be made based on how much and how often the average consumer is exposed to advertising in relation to the other parts of the publication. The same applies if the average consumer is exposed to several different advertisements with changing advertising messages on one and the same digital surface.

4.3 Entirely or mainly consists of moving image or audible music

A condition for the reduced tax rate to apply to a publication provided electronically is that it does not consist entirely or mainly of moving images or audible music. Moving image in this context refers to, for example, video clips, films, live news broadcasts and other types of television programs with or without sound.

If a publication contains moving images or audible music and text, an assessment must be made as to whether the publication mainly consists of moving images or audible music. Consideration must then be given to the significance of the various parts for an average consumer.

If the text in a publication is only a means for the customer to be able to make the best use of the moving image or the audible music, the publication is not covered by the reduced tax rate. The main part in such a case consists of the moving image or the audible music. The moving image or the audible music is in such a case of primary importance to the average consumer.

If, on the other hand, the moving image or the audible music is of minor importance to the average consumer, the publication does not consist mainly of the moving image or the audible music. This is, for example, the case with a newspaper that is provided electronically and that mainly contains text, still images and a smaller portion of moving images.

E-Commerce / Electronic services Rate