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Luxembourg Tax News 2015-09

Luxembourg Tax News 2015-09



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3% VAT rate not applicable to digital books

Case C-502/13, European Commission v. Grand Duchy of Luxembourg – Decision published on 5 March 2015.

The Court of Justice of the European Union confirms that the Grand Duchy of Luxembourg, by applying a VAT rate of 3% to digital books, failed to fulfil its obligations under the VAT Directive.

On 5 March 2015, the Court of Justice of the European Union (hereafter CJEU) had to decide whether Luxembourg’s legislation, foreseeing the application of a VAT rate of 3% to digital books, was compatible or not with Articles 96 to 99, 110 and 114 of the Council Directive 2006/112/EC, read in conjunction with Annexes II and III to that Directive and the Council implementing Regulation (EU) n° 28/2011 of 15 March 2011.

In Luxembourg, the application of the super-reduced rate of 3% to digital books has been explicitly confirmed in a circular issued by the Luxembourg VAT Authorities on 12 December 2011, applicable since 1 January 2012.

The Commission brought an action for infringement of EU Law before the CJEU. According to the Commission, the super-reduced rate was incompatible with the wording of Articles 96 and 98; indeed such a rate may only be applicable to the supplies of goods and services referred to in the Annex III of the VAT Directive, whereas electronic books are not expressly mentioned in the latter.

Furthermore, the Commission pointed out that there is a minimum rate applicable to the supply of electronic books, fixed in Article 99 of the VAT Directive and amounting to 5%.

Finally, the application of the super-reduced rate is not covered by the exception provided under Articles 110 or 114 of the VAT Directive.

In the context of its judgment, the CJEU refused to examine the argument of breach of equal treatment between books irrespective of their format invoked by Luxembourg.

Also, on 5 March 2015, the CJEU condemned France on a similar case in judgment C-479/13 alleging that by submitting the supply of electronic books to a super-reduced rate of 7% from 1 January 2012, then of 5.5% from 1 January 2013, the French legislation was not compatible with the VAT Directive.

These judgments of the CJEU occur shortly after the Member States implemented the changes concerning place of supplies rules for the provision of electronic services to B2C customers.

It has to be noted that Luxembourg keeps the lowest VAT rates in the EU despite a recent 2% increase.


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