October 8, 2018

On 2 October 2018 the Council agreed a proposal allowing Member States to apply reduced, super-reduced or zero VAT rates to electronic publications, thereby aligning VAT rules for electronic publications with physical publications. The proposal is part of the EU’s efforts to modernise VAT for the digital economy.

Under the current VAT rules electronically supplied services are taxed at the standard VAT rate, i.e. a minimum of 15%. For physical publications (books, newspapers and periodicals) Member States currently have the option of applying a “reduced” VAT rate, i.e. a minimum 5%. Some have been authorised to apply “super-reduced” VAT rates (below 5%) or “zero” rates (which involve VAT deductibility).

The new VAT Directive proposal, which amends Directive (2006/112/EC), will allow Member States that so wish to apply reduced VAT rates to electronic publications, but super-reduced and zero rates will only apply to Member States that already apply them to physical publications.

The new rules will apply temporarily, pending the introduction of a new, “definitive” VAT system. The Commission has issued proposals for the new system, which would allow Member States more flexibility than at present in setting VAT rates. To read the Council’s press release in full and for a link to the proposed Directive, click here.