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Digital mags could force EU VAT change

Posted: January 8, 2016

For many years, critics of the European Union have highlighted some of the unusual – and occasionally bizarre – rulings and legislation that emanate from the various bodies within the Union. The ‘bendy banana’ rule may actually be an urban myth but there are plenty of examples of bureaucracy and red tape that help to keep the headline writers busy.

In addition, the inability of the various bodies within the Union to react to changes and new developments, with the speed of response similar to that of a glacier, does cause concern and impacts on business sectors. One particular area that demonstrates this is that of digital publications.

In 2012 France and Luxembourg decided that the reduced rate of VAT in each country (5.5% and 3% respectively) should equally apply to e-publications as well as paper versions of books and newspapers. Their view was that it was incorrect to apply differing VAT rates to what were, essentially, the same products.

This view contravened the EU VAT Directive (which was constructed before e-publications became commonplace) and, in March 2015, both countries were forced to amend their legislation so that full rate VAT applied to digital books and newspapers.

In what some might see as a demonstration of rebellion, Italy will apply their reduced rate of VAT (4%) to e-books, digital newspapers and journals from 1 January 2016.

The groundswell of feeling and calls for review of the VAT Directive is growing, and Germany, Poland and France have long been requesting that the EU looks again at its stance on the VAT liability of digital publications. The Italian decision will force the EU to do this, and will either result in it taking an entrenched position and refusing to budge, or an overhaul of the legislation and an acceptance of what many may see as an obvious and inevitable acceptance of new commercial reality.

Those operating in the publication sector may want to keep an eye out for further developments on this.