Brussels, 15/05/2014 (Agence Europe) - Different VAT rates applied to the sale of printed books and audio and digital books (recorded on DVD, CD-Rom and USB sticks) can be justified under European law when it is proved that the latter have specific characteristics or properties compared to the former and that the average consumer perceives them as such.
This is the conclusion that Advocate General Paolo Mengozzi reached on Wednesday 14 May in Case C-219/13 K, where a Finnish court requested the European Court of Justice to look at whether Finland can exclusively apply reduced VAT rates of 9% to printed books, while applying rates of 23% on audio and digital books, in the knowledge that the VAT Directive (2006/112/EC) provides member states with the possibility of applying reduced VAT rates on books when any kind of electronic device is used.
In his conclusions, Mengozzi pointed out that member states could apply a selective application of reduced VAT rates within the same category of providing a service, on the condition that they do not create distortions to competition. More specifically, two conditions must be satisfied: - differentiated VAT rates can be applied when a subcategory of service provision constitutes “concrete and specific aspects” of the general category (in this case, the sale of “books on any type of device”); - the principal of fiscal neutrality for goods and similar service provision must be respected. It considers that the first condition has been met, with regard to audio and digital books, given that, contrary to paper books, these require a technical reading mechanism (PC, DVD reader). With regard to their differentiation from printed books in the context of tax neutrality, Mengozzi points out that audio and digital books provide additional functions (opportunities to carry out research or other functions by way of the software), which can encourage the average consumer to buy them in preference or in parallel to paper books. It is therefore up to the Finnish courts to clearly clarify if and how these conditions have been verified in Finland and with regard to Finnish consumers - which could justify the exclusion of audio and digital books from the reduced VAT rate. (FG)