Super Reduced VAT Rate Not Applicable To E-Books

By judgement dated March 5th 2015 (the "Judgement"), the Court of Justice of the European Union (the "ECJ") ruled that the Grand-Duchy of Luxembourg had failed to fulfil its obligations under the Council Directive 2006/112/EC of November 28th 2006 on the common system of value added tax (the "VAT Directive") by applying its super reduced VAT rate of 3% to digital books.

The Commission had brought an action for infringement of EU Law before the ECJ. According to the Commission, the application of the super reduced rate was incompatible with the provisions of articles 96 to 99, 110 and 114 of the VAT Directive.

The reduced VAT rate is applicable only to transactions consisting in the supply of a book on a physical medium.

Indeed, the ECJ followed the reasoning of the Commission by considering that the reduced VAT rate is applicable only to transactions consisting in the supply of a book on a physical medium. Even though, in order to be able to read an electronic book, physical support, such as a computer, is required, the ECJ noted that such support is not included in the supply of electronic books.

In addition, any provision regarding the application of reduced VAT rates is to be seen as an exception to the principle that Member States are to apply a standard rate of VAT to...