COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document 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

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 1.12.2016  SWD(2016) 393 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a Council Directive  amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals {COM(2016) 758 final} {SWD(2016) 392 final}  
 
 
Executive Summary Sheet 
Impact assessment on VAT rates applied to books, newspapers and periodicals 

A. Need for action 

Why? What is the problem being addressed?  
Council  Directive  2006/112/EC  (VAT  Directive)  explicitly  excludes  electronically  supplied  services,  including 
electronically  supplied  books,  newspapers  and  periodicals  ('e-publications'),  from  the  scope  of  reduced  VAT 
rates,  whereas  Member  States  can  apply  a  reduced  VAT  rate  to  books,  newspapers  and  periodicals  on  all 
physical means of support. 
This leads to a situation whereby Member States are allowed to apply reduced VAT rates, or even lower rates 
than 5% (super-reduced and zero rates), to certain printed publications, while having to apply the standard VAT 
rate to e-publications. This results  in  a markedly less favourable VAT treatment of e-publications compared to 
printed publications. Furthermore, owing to the operation of a number of derogations to the VAT Directive, only 
10 out of 28 Member States can apply super-reduced and zero rates to certain printed publications, whereas the 
other Member States do not have the same possibility.   
The  lack  of  equal  treatment  between  formats  is  enshrined  in  the  VAT  Directive  and  does  not  allow  Member 
States to lower VAT rates on e-publications.  

What is this initiative expected to achieve?  
The specific objectives of the initiative is to allow Member States to align VAT rates for e-publications with the 
VAT rates they currently apply to printed publications. 

What is the value added of action at the EU level?  
Member States are obliged to comply with the VAT Directive and it is the VAT Directive that prevents Member 
States  from  granting  electronically  supplied  publications  the  same  VAT  rates  that  currently  apply  to  printed 
publications. This was confirmed by the CJEU in its C-479/13 and C-502/13 judgements of 5 March 2015. The 
Court  clearly  stated  that  Member  States  cannot  apply  a  reduced  VAT  rate  to  e-books  under  the  current  VAT 
Directive  and  therefore,  a  mere  interpretation  of  the  VAT  Directive,  or  soft-law  initiatives,  cannot  remedy  the 
situation. Thus, an EU-level legislative initiative to amend the VAT Directive is indispensable in order to tackle 
the problem. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
Two  policy  options  were  considered.  As  explained  in  the  previous  section,  non-legislative  policy  options  are 
ineffective, hence all options require a change of the VAT Directive.  
Option 1 would enable Member States to apply reduced rates to e-publications and enable 19 out of 28 Member 
States  to  align  VAT  rates  for  publications.  Under  option  2,  which  would  enable  Member  States  also  to  apply 
super-reduced  and  zero  rates  to  e-publications,  all  28  Member  States  would  be  able  to  align  VAT  rates  for 
publications. The selected 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. 

Who supports which option?  
Respondents to the Open Public Consultation supported nearly unanimously the possibility for Member States to 
to  apply  reduced  VAT  rates  to  e-publications,  which  is  granted  by  both  options.  The  support  for  enabling  all 
Member States to apply super-reduced and zero rates to all publications was lower at 40% of all respondents,, 
but was still the preferred option, particularly for stakeholders from the printing and the publishing industry (66%).     

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?                                       
The  selected  option  successfully  removes  restrictions  on  Member  States  that  are  no  longer  justified  under 
destination-based taxation (taxation where the customer resides) and enables Member States to align VAT rates 
for publications, independently of the format.  

What are the costs of the preferred option (if any, otherwise main ones)?                                       
If  Member  States  reduce  the  VAT  rates  applied  to  e-publications,  VAT  revenue  will  decrease.  If  all  Member 
States applied the same rates to them as they currently apply to printed publications, the loss in VAT revenue 
under the selected option could amount to a maximum of 4.7 billion euro annually.  
There is no impact on the EU own resources. 

2 

 
 
How will businesses, SMEs and micro-enterprises be affected?  
Businesses  in  the  publishing  industry,  of  which  99%  are  SMEs,  would  see  increased  profitability  under  lower 
VAT  rates.  A  limited subsititution  of  physical  by  electronic  publications  may  put  some  pressure  on  the printing 
and the (non-digital) retail sector, but both sectors have already been putting in place strategies to cope with the 
challenge from e-publications.  

Will there be significant impacts on national budgets and administrations?  
As indicated above, Member States would face a decrease in VAT revenues, if they decided to align VAT rates 
for  e-publications  with  the  VAT  rates  currently  in  place  for  printed  publications.  However,  the  selected  options 
does not oblige them to change any VAT rates. Hence, Member States will determine any budgetary impact or 
even avoid it completely.  

Will there be other significant impacts?  
The implementation of either option, and particularly of the selected option, would lead to increased complexitiy 
of the VAT system because of less harmonisation of VAT rates at the EU level. 

D. Follow up 

When will the policy be reviewed?  
The correct appplication of the VAT Directive will be monitored and a proposal for a general VAT rate reform was 
announced by the Commission in its Action Plan on VAT already for the end of 2017.  

3