Italy and Malta slash ebook tax rates in Euro VAT inferno

There has been another turn in the European ebook VAT fiasco, with both Italy and Malta slashing the tax rate.

The two countries have cut the VAT payable on ebooks from the standard rate charged for other goods to match the rate they charge on print books.

In the case of Italy, this means a reduction from 22% to 4%, while Malta will see a cut from 18% to 5%. They join France, who has also set ebook VAT at 5% to match the rate on print books.

This leaves the UK, the biggest ebook market in Europe, slapping a huge 20% VAT charge on ebooks from January 1, 2015, despite print books in the UK being zero-rated for VAT due to their cultural contribution.

Other countries still sticking to their infernally high VAT rates for ebooks include Germany, the second-biggest ebook market in Europe, at 19% (7% for print books), the Netherlands with 21% (6% on print books), and Spain also with 21% (4% on print books).

The new tax levy is coming in as part of the European Union’s get-tough campaign largely aimed at digital sellers, including Amazon which has kept European VAT (value-added tax) at arm’s-length for years by claiming to sell all their ebooks in Europe through their base in Luxembourg where VAT is a minimal 3%.

European legislation now requires sellers from January 1, 2015, to charge VAT at the rate of the buyer’s country.

A further twist in the hellish saga is that Malta’s VAT cut may be irrelevant in terms of ebook sales through Kindle at least. Amazon does not have a dedicated Malta website, so people living in Malta generally have their Kindle registered either to Amazon.com or Amazon.co.uk.

I can only imagine the rate of VAT will be calculated on the location of the store where the ebook is bought rather than on the actual physical location of the buyer. Amazon says as much in its KDP Support section on European VAT which states, ‘We will add the applicable VAT based on the primary country of the marketplace.’

This could mean that Kindle ebook buyers in Malta would be hit by a 20% VAT charge if they’re registered to Amazon.co.uk or no VAT if they come under Amazon.com.

Authors face the dilemma of either raising their prices and perhaps seeing sales decline or losing up to a fifth or more of their ebook earnings in Europe.

The taxman cometh: how the new European tax swoop will hit authors

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