Work

20.January 2010 - 00:00

VAT on audiobooks

The application of different rates of VAT to books and audiobooks gave rise to much bewilderment in the EU Member States, both about the basis for these rates and about how they would be implemented in practice.

In Sweden, for example, on 1 January 2002, VAT on books and periodicals was cut from 25 % to 6 %, and the VAT reduction also applied to audiobooks. Reducing the price of audiobooks immediately boosted their sales, and audiobooks became the fastest growing sector on the book market in Sweden.

However, on 23 March 2007 the Commission sent Sweden a reasoned opinion stating that the reduced VAT on audiobooks conflicted with Community law and in particular with the list — set out in Annex III to the EU's Sixth VAT Directive (77/388/EEC(1)) — of products to which the usual lower VAT rate may be applied. The Commission considered that audiobooks do not generally fall within the categories listed in Annex III.

In Finland the position is clear, since, under the Sixth VAT Directive, it is not possible to apply a reduced rate of VAT to the sale of audiobooks. Under the annex, a reduced 8 % VAT rate does apply to certain goods, such as books, but the terms of the directive do not justify its application to audiobooks.

An interesting situation arises, however, when an audiobook is to be sold in the same package as a printed book. In such cases the orthodox practice would be either to treat the parts of the product subject to different tax rates separately, or to treat the product as a multimedia product, in which case the whole product would be subject to the higher tax rate. The separate treatment model, however, presents challenges for the trade’s information systems, which have not hitherto previously had to deal with such combined products.

It would admittedly be profitable to set an artificially low price for the audiobook portion with the higher tax rate, but this would verge upon tax evasion. On the other hand, it would not be sensible to tax the whole product at the higher rate, because this would raise the retail price considerably.

Since the interpretation of Annex III to the Sixth VAT Directive is so clear as regards audiobooks, how does the Commission consider the sale of a book and an audiobook in the same package should be treated for VAT purposes? Does the Commission propose to adopt across-the-board guidelines for taxation practice at EU level, so that combined book/audiobook products in all Member States can be competitive on the EU internal market too?

(1) OJ L 145, 13.6.1977, p. 1.

20 January 2010

Answer given by Mr Kovács on behalf of the Commission

Member States are normally required to apply a standard rate of VAT of at least 15 % to all supplies of goods and services. They may, however, opt to apply one or two reduced rates to some or all of a list of goods and services set out in Annex III to the VAT Directive(1).

Annex III constitutes an exception to the general system established by the VAT Directive, according to which all supplies of goods and services must be taxed at the standard VAT rate applicable in each Member State. According to the settled case law of the Court of Justice, provisions that are exceptions to a principle must be interpreted strictly.

Council Directive 2009/47/EC(2) amending the VAT Directive adopted on 5 May 2009, clarified and updated to technical progress the reference to books. Accordingly, a reduced rate may now be applied on supplies of books on all physical means of support.

Following this amendment, it is clear that the Member States may apply the same rate of VAT to books on all physical means of support and hence also to the sale of a package comprising a book and an audio book.

The Commission would also refer the Honourable Member to the reply given to Written Question P 5352/09 by Ms Thyssen(3).

(1) Council Directive 2006/112/EC of 28 November 2006 on the Common System of Value Added Tax, recast of the Sixth VAT Directive, OJ L 347, 11.12.2006.

(2) Council Directive 2009/47/EC of 5 May 2009 amending Directive 2006/112/EC as regards reduced rates of value added tax, OJ L 116, 9.5.2009.

(3) http://www.europarl.europa.eu/QP-WEB/home.jsp

Share Button