European Commission v Grand Duchy of Luxembourg.
Date: 2015-03-05
33. In that regard, it should be noted that Article 96 of the VAT Directive provides that the same rate of VAT, namely, the standard rate, is applicable to supplies of goods and services. As an exception to that principle, Article 98(1) of the VAT Directive gives the Member States the option of applying either one or two reduced rates of VAT. In accordance with the first subparagraph of Article 98(2), the reduced rates of VAT can apply only to supplies of goods and services in the categories set out in Annex III to the VAT Directive (judgment in K , C‑219/13, EU:C:2014:2207, paragraphs 21 and 22).
34. As regards the argument raised by the Grand Duchy of Luxembourg and the Kingdom of Belgium that the supply of electronic books is covered by point 6 of Annex III to the VAT Directive, it should be borne in mind that, in determining the scope of a provision of EU law, its wording, context and objectives must all be taken into account (see, inter alia, judgment in NCC Construction Danmark , C‑174/08, EU:C:2009:669, paragraph 23 and the case-law cited).
38. That interpretation is supported by the context of that provision. That provision is an exception to the principle that Member States are to apply a standard rate of VAT to transactions subject to VAT and must therefore be interpreted strictly (see, inter alia, judgment in Commission v Spain , C‑360/11, EU:C:2013:17, paragraph 18 and the case-law cited).
50. Contrary to what the Grand Duchy of Luxembourg and the Kingdom of Belgium argue, that interpretation is not undermined by the principle of fiscal neutrality, which was intended by the EU legislature to reflect, in matters relating to VAT, the general principle of equal treatment (judgment in NCC Construction Danmark , EU:C:2009:669, paragraph 41 and the case-law cited).
51. The principle of fiscal neutrality cannot extend the scope of reduced rates of VAT to the supply of electronic books (see, to that effect, judgment in Zimmermann , C‑174/11, EU:C:2012:716, paragraph 50 and the case-law cited). Point 6 of Annex III to the VAT Directive is not a provision which, unequivocally, extends the scope of reduced rates of VAT to the supply of electronic books. On the contrary, as is clear from paragraph 49 above, such a supply is not covered by that provision.
56. In the absence of a provision of the FEU Treaty expressly permitting it to do so, a Member State cannot, therefore, properly plead the unlawfulness of a directive addressed to it as a defence in an action for a declaration that it has failed to fulfil its obligations arising out of its failure to implement that directive. The position could be different only if the act in question contained such particularly serious and manifest defects that it could be categorised as a non-existent act, defects which the Grand Duchy of Luxembourg does not claim exist (see judgment in Commission v Austria , C‑189/09, EU:C:2010:455, paragraphs 15 to 17 and the case-law cited).
66. As regards Article 110 of the VAT Directive, it must be recalled that, as is clear from the wording of that provision, the possibility open to Member States of applying reduced rates lower than the minimum laid down in Article 99 of the VAT Directive is conditional on four cumulative conditions being met, one of which is that the reduced rates must be in accordance with EU legislation (judgment in Commission v France , C‑596/10, EU:C:2012:130, paragraph 75).
67. As is clear from paragraph 63 above, the application of a reduced rate of VAT to the supply of electronic books does not comply with Article 98(2) of the VAT Directive. In those circumstances, without there being any need to consider whether the other conditions set out in Article 110 of that directive are met, the derogation provided for by the latter provision cannot justify the application by the Grand Duchy of Luxembourg of a reduced VAT rate of 3% to the supply of electronic books (see, to that effect, judgment in Commission v France , EU:C:2012:130, paragraphs 76 and 77).