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VAT treatment e-books

Deloitte Malta Tax Alert

Court of Justice decides on application of reduced VAT rate to e-books

Today’s decision

In July 2012, the EU launched infringement proceedings against Luxembourg and France for applying reduced VAT rates to e-books books (i.e. books supplied by download from the internet or web streaming, and which can be viewed on a computer, an iPad or Kindle device, a smartphone, an e-book reader, etc.). Since the countries continued to apply a reduced rate of 3% and 5.5% respectively to e-books, the European Commission referred them to the Court of Justice of the European Union (CJEU) as their policy was potentially incompatible with the EU VAT Directive.

Earlier today, the Court decided that, indeed, applying a reduced VAT rate to e-books is incompatible with the principles set out in the EU VAT Directive, which allows for a reduced VAT rate to be applied only to books “on all physical means of support” and explicitly states that reduced rates may not be applied to electronically supplied services.

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Malta reduces VAT rate on books disseminated through electronic means

The Minister of Finance during his Budget 2015 speech held on 17 November 2014 announced that the Malta VAT rate on books disseminated through electronic means will be reduced from 18% to 5% to bring them in line with the VAT rate that applies to books published in paper format.

This reduced rate will apply solely to books disseminated through electronic means such as audio books or books published on CDs, DVDs, SD-cards or USB drives and not to e-books downloaded from the internet, in accordance with the EU VAT Directive and the CJEU’s decision of earlier today.

Please note that the above measure was announced by the Minister of Finance but has not yet been enacted.

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How can Deloitte help?

Correctly discharging your VAT liability is of great importance, as non-compliance may lead to, amongst other sanctions, the imposition of administrative penalties and the charging of interest.

Should you have any questions with respect to the classification of any of your activities for VAT purposes, the correct VAT treatment thereof, what VAT rate to apply (if any), what the related VAT compliance/reporting obligations are (if any) or should you have any other VAT related questions, please do not hesitate to contact Mark Grech (see below) or your usual Deloitte Malta contact.

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