Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals
Date: 2016-12-01
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: EU Member State, VAT, book trade, electronic publishing, newspaper, serial publication, tax harmonisation, tax relief

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   EUROPEAN COMMISSION  Brussels, 1.12.2016  COM(2016) 758 final 2016/0374 (CNS)   Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals   {SWD(2016) 392 final} {SWD(2016) 393 final}  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

According to Council Directive 2006/112/EC of 28 November 2006 on the common system 
of value added tax (hereinafter 'the VAT Directive') electronically supplied services including 
electronically  supplied  publications  (hereinafter  'e-publications')  have  to  be  taxed  at  the 
standard VAT rate (minimum 15%). On the other hand, Member States have the option to tax 
publications  on  any  means  of  physical  support  at  a  reduced  VAT  rate  (minimum  5%)  and 
some Member States were granted the possibility to continue to apply VAT rates lower than 
the current minimum of 5% (super-reduced rates) including exemptions with the deductibility 
of the VAT paid at the preceding stage (so called zero rates) to certain printed publications.  

The  VAT  Directive  prevents  Member  States  from  applying  the  same  VAT  rates  to  
e-publications  as  they  currently  apply  to  physical  publications  and  the  result  is  a  markedly 
in  most  Member  States.  While 
less  favourable  VAT 
acknowledging the differences between printed publications and e-publications with regard to 
the format, they offer the same reading content for consumers.  

treatment  of  e-publications 

Since  1  January  2015,  with  the  entry  into  force  of  new  "place  of  supply"  rules,  a 
harmonisation  of  VAT  rates  for  electronically  supplied  services  and  in  particular 
electronically  supplied  publications  is  no  longer  a  requirement.  VAT  is  since  then  levied, 
where  the  customer  is  based  and  suppliers  can  no  longer  benefit  from  being  located  in 
Member States with the lowest VAT rates. 

As stated in the Commission's Action Plan  on  VAT1 the current rules  on VAT rates do not 
fully take into account technological and economic developments with regard to e-books and 
electronic newspapers. Modernising VAT for the digital economy is also a key objective of 
the Digital Single Market Strategy2.  

In  its  conclusions  of  25  May  2016  on  the  Action  Plan  on  VAT  the  Council  invited  the 
Commission  to  present  a  legislative  proposal  which  integrates  provisions  concerning  VAT 
rates for e-publications in the context of Digital Single Market initiatives by the end of 2016 
and include an impact assessment.  

In line with the Council conclusions and the commitment in its 2016 Action Plan on VAT, the 
Commission proposes to grant all Member States, the possibility to apply the same VAT rates 
to  electronically  supplied  publications  as  Member  States  currently  apply  to  printed 
publications, which include reduced, super-reduced and zero rates.  

• 

Consistency with existing policy provisions in the policy area 

The proposal is consistent with the announcement in the VAT Action Plan to grant Member 
States more freedom in setting VAT rates in a destination-based definitive VAT regime by a 
legislative proposal in 2017.  

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Communication  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European 
Economic and Social Committee on an action plan on VAT - Towards a single EU VAT area - Time to 
decide, COM(2016) 148 final, 7 April 2016. 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European 
Economic and Social Committee and the Committee of the Regions, A Digital Single Market Strategy 
for Europe, COM(2015) 192 final, 6 May 2015. 

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• 

Consistency with other Union policies 

The proposal is consistent with the Commission's Digital Single Market Strategy. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The proposal is based on Article 113 of the Treaty on the Functioning of the EU (TFEU). This 
article provides for the Council, acting unanimously in accordance with a special legislative 
procedure  and  after  consulting  the  European  Parliament  and  the  Economic  and  Social 
Committee, to adopt provisions for the harmonisation of Member States' rules in the area of 
indirect taxation. 

• 

Subsidiarity (for non-exclusive competence)  

Member  States  are  obliged  to  comply  with  the  VAT  Directive,  which  prevents  them  from 
granting e-publications the same VAT rates that they currently apply to printed publications. 
An EU-level legislative initiative to amend the Directive is indispensable in order to tackle the 
problem. This was confirmed by the Court of Justice of the European Union (CJEU) in its C-
479/13  and  C-502/13  judgments  of  5  March  2015,  in  which  the  CJEU  clearly  stated  that 
Member States cannot apply a reduced VAT rate to e-books under the current VAT Directive. 

• 

Proportionality 

The proposal is considered to be consistent with the principle of proportionality i.e. it does not 
go  beyond what  is  necessary to  meet  the  objectives  of  the  Treaties in  particular  the  smooth 
functioning  of  the  Single  Market.  Setting  and  restricting  VAT  rates  for  e-publications  falls 
under  the  responsibility  of  Member  States.  The  initiative  does  not  oblige  Member  States  to 
change any VAT rates currently in force; it only relieves Member States from any restrictions 
in setting VAT rates for publications. 

• 

Choice of the instrument 

A Directive is needed to amend the current Directive. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

An open public consultation was held for 8 weeks between 25 July and 19 September 2016. 
The  consultation  had  two  main  purposes.  The  first  was  to  get  the  views  of  a  wide  range  of 
stakeholders  on  the  Commission’s  commitment  to  enable  Member  States  to  apply  reduced 
VAT  rates  for  e-publications,  and  the  second  was  to  provide  them  with  an  opportunity  to 
present their views on the most appropriate definition(s) for e-publications that could benefit 
from a reduced VAT rate.  

The  Commission  received  858  submissions  from  readers  (50%),  businesses  (16%), 
organisations (14%), authors (12%) and public authorities, researchers and libraries (8%) via 
the  EU  Survey  tool,  and  four  other  contributions  by  email.  The  thrust  of  responses  did  not 
differ meaningfully between these groups of respondents, nor according to the Member States 
where the participants are located. An overwhelming majority of 94% of respondents agreed 
that Member States should be allowed to apply a reduced VAT rate to e-books, while 88% of 
them  agreed  that  Member  States  should  be  allowed  to  apply  a  reduced  VAT  rate  to  e-

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newspapers  and  e-periodicals  as  well.  A  plurality  of  respondents  (45%)  found  that  existing 
super-reduced  (lower  than  5%)  and  zero  rates  for  printed  publications  should  not  be 
abolished, and 90% of these respondents agreed on allowing all Member States to apply such 
super-reduced  or  zero  VAT  rates  to  printed  publications  and  as  well  e-publications. 
Respondents  were  roughly  evenly  split  in  assessing  the  effect  of  reducing  VAT  rates  on  e-
publications,  with  some  expecting  a  full  pass-on  of  any  VAT  cut  to  consumers  and  others 
expecting  a  partial  pass-on.  In  the  latter  case,  profit  margins  for  publishers  would  increase, 
and  the  majority  of  stakeholders assumed  that  in  such  a  case  the  publishing  industry  would 
with regard to books invest in new content and that with regard to newspapers and periodicals 
the publishing industry would as well invest in new content, but also be less dependent from 
advertising revenue. 

The consultation also confirmed that a definition of publications in Union law had to be broad 
and  robust  enough  to  cater  for  future  technological  developments.  A  share  of  59%  of 
respondents  did  not  see  the  need  to  define  the  terms  book,  newspaper  or  periodical  in  a 
uniform way at EU level. 

• 

Impact assessment 

The  impact  assessment  accompanying  this  proposal  was  considered  by  the  Regulatory 
Scrutiny Board. Following a negative opinion and after revising the initial impact assessment, 
on 11 November 2016 the Board finally gave a positive opinion with reservations.3 The final 
impact  assessment  takes  into  account  all  recommendations  by  the  Board  and  a  detailed 
overview on how the recommendations have been taken into account is included in Annex 1 
to the Staff Working Document for the impact assessment.  

The impact assessment examines the baseline scenario, two policy options and their impacts. 
Option  1  would  enable  Member  States  to  apply  a  reduced  VAT  rate  to  the  supply  of 
publications, both on any means of physical support or electronically supplied. In addition to 
option 1, option 2 would also enable Member States to apply reduced VAT rates lower than 
the current minimum of 5% or to grant exemptions with deductibility of the VAT paid at the 
preceding  stage  to  the  supply  of  publications,  both  on  any  means  of  physical  support  or 
electronically supplied. 

Both  options  are  preferred  over  the  baseline  scenario  (no  changes  to  the  current  rules), 
because they fulfil the objective of this targeted initiative. Option 1 would allow 19 Member 
States  to  align  the  VAT  rates  for  e-publications  with  the  current  VAT  rates  for  printed 
publications  and  option  2  would  allow  all  28  Member  States  to  align  VAT  rates  for  e-
publications with the current VAT rates for printed publications.  

Option 2 has the further advantage that it is fully in line with the Action Plan on VAT, namely 
that derogations (super-reduced and zero rates) only available to a few Member States should 
be  granted  to  all  Member  States in  a  definitive  VAT  regime.  Therefore,  options  2 has  been 
selected for this proposal. It is estimated that this option could lead to a maximum decrease of 
VAT revenues for Member States by 2021 by EUR 4.7 billion annually, if all Member States 
decided to apply the current VAT rates for printed publications as well to e-publications. 

The  proposal  will  not  reduce  administrative  burden  for  business  and  collection  costs  for 
Member  States.  Increased  administrative  costs  could  be  incurred  in  the  transition  from  the 
simpler standard rate framework for e-publications to a system with a greater variety of rates. 

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SEC(2016) 493  

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On  the  other  hand,  the  taxation  of  transactions  consisting  of  a  bundle  supply  of  a  printed 
publication together with an e-publication could be facilitated. 

4. 

BUDGETARY IMPLICATIONS 

The proposal has no negative impact on the Union budget; because VAT rates applied in the 
Member States have no impact on the VAT own resources calculations.  

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

Monitoring is required with regard to the correct applications of the VAT Directive. Beyond 
that, the monitoring at EU level takes place in a continuous review of the scope of the reduced 
rate in line with Article 100 of the VAT Directive and a collection of information about the 
VAT  rates  applied  in  each  Member  State,  currently  published  by  the  Commission  in  the 
document "VAT rates applied in the Member States of the European Union"4. 

• 

Explanatory documents (for directives) 

The proposal does not require Explanatory Documents on the transposition. 

• 

Detailed explanation of the specific provisions of the proposal 

In order to enable Member States to harmonise the VAT rate treatment of e-publications with 
the treatment of printed publications and publications on all physical means of support, three 
amendments of the VAT Directive are required:  

1. Amending Annex III 

Under  point  6  of  Annex  III  references  to  "all  physical  means  of  support"  and  to 
specific  formats  for  printed  publications  "(brochures,  leaflets  and  similar  printed 
matter, children’s picture, drawing or colouring books, music printed or in manuscript 
form,  maps  and  hydrographic  or  similar  charts)"  will  be  deleted  and  the  condition 
"other  than  publications  wholly  or  predominantly  consisting  of  music  or  video 
content" will be introduced. 

2. Amending Article 98 

Under the current Directive all electronically supplied services have to be taxed under 
the standard VAT rate to which an exception for electronically supplied publications is 
introduced.  

3. Amending Article 99 

A paragraph 3 is added to Article 99 to allow Member States to apply reduced rates 
lower  than  the  minimum  laid  down  in  this  Article  or  to  grant  exemptions  with 
deductibility  of  the  VAT  paid  at  the  preceding  stage  to  the  supply  of  the  goods  and 
services mentioned under the amended point 6 of Annex III. 

Striking  out  the  references  to  format  and  referring  in  general  to  books,  newspapers  and 
periodicals is a requirement to cover as well e-publications and Member States would be able 

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https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/vat_rates_en.pdf 

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to  continue  to  restrict  the  application  of  reduced  rates  to  certain  books,  newspapers  and 
periodicals, e.g. by excluding specific formats or content.  

The supply of pure music and video content would continue to be taxed at the standard VAT 
rate, as  would  publications  that  predominantly consist  of  music  and  video  content.  Member 
States  would  have  the discretion  to  specify  the  term  "predominantly"  in  their  national  VAT 
law.  This  solution  would  also  allow  Member  States  to  continue  to  apply  a  reduced  rate  for 
audio books, audio newspapers and periodicals for people with sight loss.  

This proposal does not put forward any EU level definition of the terms book, newspaper and 
periodical  at  EU  level.  E-publications  are  evolving  and  any  specific  definition  of  what  is  a 
book, newspaper or periodical risks being outdated within a short time. Given the unanimity 
requirement for EU legislation in tax matters, Member States are generally able to adapt the 
rules to future needs in a more timely fashion than the EU could.  

The third amendment of the VAT Directive acknowledges the fact that several Member States 
were  granted  derogations  and  apply  rates  lower  than  reduced  rates  (including  zero  rates)  to 
certain  printed  publications.  The  possibility  to  apply  an  additional  reduced  rates  lower  than 
the current minimum of 5% or granting exemptions with deductibility of the VAT paid at the 
preceding  stage  to  the  supply  of  books,  newspaper  and  periodicals  will  be  granted  to  all 
Member  States,  so  as  to  enable  them  to  align  VAT  rates  for  e-publications  with  the  VAT 
currently in force for printed publications.  

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2016/0374 (CNS) 

Proposal for a 

COUNCIL DIRECTIVE 

amending Directive 2006/112/EC, as regards rates of value added tax applied to books, 
newspapers and periodicals   

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 113 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Parliament5, 
Having regard to the opinion of the European Economic and Social Committee6, 

Acting in accordance with a special legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

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6 
7 

8 
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Council Directive 2006/112/EC7 provides that Member States may apply reduced rates 
of value added tax (VAT) to publications on any means of physical support. However, 
a  reduced  VAT  rate  cannot  be  applied  to  electronically  supplied  publications,  which 
have to be taxed at the standard VAT rate. 
In  line  with  the  Commission's  Digital  Single  Market  Strategy8  and  in  order  to  keep 
abreast  of  technological  progress  in  a  digital  economy,  Member  States  should  be 
enabled  to  align  the  VAT  rates  for  electronically  supplied  publications  with  lower 
VAT rates for publications on any means of physical support.  
In  the  Action  Plan  on  VAT9,  the  Commission  outlined  that  electronically  supplied 
publications should be able to benefit from the same preferential VAT rate treatment 
as publications on any  means of physical support. To achieve this aim, this needs to 
include  the  possibility  for  all  Member  States  to  apply  to  the  supply  of  books, 
newspapers  and  periodicals  either  a  reduced  VAT  rate  or  lower  reduced  VAT  rates 
including the possibility of granting exemptions with deductibility of the VAT paid at 
the preceding stage. 

Since 1 January 2015, VAT on all electronically supplied services has been levied in 
the  Member  State  where  the  customer  is  based.  Given  the  implementation  of  the 
destination-based  principle,  it  is  no  longer  necessary  to  apply  the  standard  rate  to 
electronically  supplied  publications  in  order  to  ensure  the  establishment  and  the 
functioning of the internal market and to avoid distortion of competition. 

OJ C , , p. . 
OJ C , , p. . 
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 
347, 11.12.2006, p. 1). 
COM(2015) 0192 final 
COM(2016) 148 final 

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(5) 

In  order  to  prevent  an  extensive  use  of  reduced  VAT  rates  to  audio-visual  content, 
Member  States  should  be  enabled  to  apply  a  reduced  rate  to  books,  newspapers  and 
periodicals,  only  if  these  publications,  both  on  any  means  of  physical  support  or 
electronically  supplied,  do  not  wholly  or  predominantly  consist  of  music  or  video 
content.  

(6)  Member  States  should  maintain  discretion  to  set  VAT  rates  for  publications  and 

restrict the scope of reduced VAT rates.  

(7) 

Directive 2006/112/EC should therefore be amended accordingly, 

HAS ADOPTED THIS DIRECTIVE: 

Directive 2006/112/EC is amended as follows: 

Article 1 

(1) 

in Article 98(2), the second subparagraph is replaced by the following: 

The  reduced  rates  shall  not  apply  to  electronically  supplied  services  with  the  exception  of 
those falling under point (6) of Annex III.' 

(2) 

In Article 99, the following paragraph 3 is added: 

'3. 
 By  way  of  derogation  from  paragraph  1,  Member  States  may  apply  reduced  rates 
lower than the minimum laid down in this Article or may grant exemptions with deductibility 
of the VAT paid at the preceding stage to goods and services referred to in point (6) of Annex 
III.' 

(3) 

'(6) 

in Annex III, point (6) is replaced by the following: 

the  supply,  including  on  loan  by  libraries,  of  books,  newspapers  and  periodicals, 
other  than  publications  wholly  or  predominantly  devoted  to  advertising  and  other 
than publications wholly or predominantly consisting of music or video content;'  

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 2 

This Directive is addressed to the Member States. 

Done at Brussels, 

Article 3 

For the Council 
The President 

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