On Tuesday 7 March, the Court of Justice of the European Union confirmed the legality of the VAT directive, which prohibits the application of a reduced VAT rate to books, newspapers and digital periodicals provided electronically (case C-390/15). This judgement takes up the conclusions of the Advocate General (see EUROPE 11619).
The VAT directive (Directive 2006/112/EEC) allows the member states to apply a reduced rate of VAT to printed publications such as books, newspapers and periodicals. However, it prohibits them from applying this reduced rate to digital publications (with the exception of digital books supplied on a physical medium, such as a CD), which attract the normal rate of VAT.
In answer to a preliminary question from the Polish Constitutional Court, the Court states that this difference in treatment is justified in light of the constant evolution to which electronic services are subjected. The legislator of the EU, which has broad powers of interpretation, opted for clear, simple and uniform rules for these services, so that the VAT rate applicable to them can be established with certainty, which in turn makes it easier for taxpayers and the national tax authorities to manage the tax. By excluding the application of a reduced rate of VAT for electronic services, the EU legislator is making sure that taxpayers and national tax authorities will not have to assess, for each type of such services, whether it comes under one of the categories of services liable to benefit from a reduced rate under the VAT directive, the Court explains. It concludes that this difference in taxation, which was brought about with the aim of providing coherence, is compatible with the principal of equality of treatment.
As to whether the European Parliament had had sufficient involvement in the legislative procedure, the Court takes the view that there was no requirement for the Parliament to be consulted again on the provision limiting the application of a reduced VAT rate to the supply of books on a physical medium alone. The Court explains that the final text of the provision in question is merely a simplification of the wording of the text that featured in the proposed directive and the substance of this was entirely maintained. The Council was therefore not required to consult the Parliament again. The Court therefore concludes that this provision of the directive is not invalid. (Original version in French by Sophie Petitjean)