European Court setback but changes in tax rules will cut VAT on ebooks

The prospect of VAT on ebooks being slashed in the European Union has hit a snag after the European Court ruled this week that VAT on ebooks cannot be reduced to the levels of print books under the present EU tax rules.

However, the likelihood is that countries will soon be able to cut VAT (value-added tax) on ebooks after changes are made to bring in new regulations.

The EC ruling said ebooks could not benefit from a lower rate of VAT in the same way as print books because ebooks come under the category of e-commerce for VAT purposes.

The verdict was in response to EU member country Poland calling into question the anomalies between printed and digital products if varying levels of VAT were allowed to be levied.

But planned changes in tax rules should mean that countries can go ahead to reduce tax on ebooks.

In December last year, the European Commission said it was  delivering on its pledge to enable member states to apply the same VAT rate to e-publications such as ebooks and online newspapers as for their printed equivalents, removing provisions that excluded e-publications from the favorable tax treatment allowed for traditional printed publications.

France is particularly likely to be among the countries looking to offer a lower rate of ebook VAT as the French tax was cut before the European Court ruled that it had to be restored to the standard level of VAT.

The tax difference between print and ebooks is particularly marked in the UK where print books are exempt from the tax while ebooks get hit with the standard VAT rate of 20%.

European Union lifts the VAT burden on ebooks