Ebooks are books rather than ‘electronically supplied services’, the European Union has ruled.
The move means that member countries of the EU will be free to slash VAT (valued-added tax) on ebooks which have been hit by high rates of tax.
Some European countries have lower rates of VAT on print books than for other products and services, where the tax is generally somewhere between 15% and 20%. For example, in the UK (which has voted to quit the EU), print books are zero-rated and incur no VAT while ebooks have a 20% surcharge slapped on them.
However, this 20% tax was applied more as an admonishment to tech firms such as Amazon and Google, which have been seen as dodging VAT by funnelling sales through the low-tax territory of Luxembourg, so it remains to be seen whether the UK, which is the second-biggest ebook market, will actually make any move to cut the ebook tax, whether it’s a member of the EU or not. This could place publishers in the difficult position of facing higher ebook taxes in the UK than in the EU.
The Financial Times reports that Pierre Moscovici, the EU tax commissioner, says the European Commission will propose legislation after recognizing that ebooks “are books”. The change would mean each member of the EU could bring down VAT rates close to zero.