Poland challenges EC ruling on e-book VAT

Poland challenges EC ruling on e-book VAT

Poland’s constitutional court has challenged a European Commission ruling that VAT on e-books must be charged at the standard rate.

Tax advisor Richard Asquith has described the challenge as “the first in a number” expected following the EC ruling on VAT on e-books earlier in the year.

The EC has previously ruled that e-books are electronically supplied services and not goods, and were not entitled to reduced VAT rate status, unlike printed books, which are.

In a test case last March, the EC ruled that France and Luxembourg must raise the VAT on e-books from 5.5% and 3% respectively, to their standard rates of 19% and 17% respectively.

Last week, Poland’s Constitutional Court challenged the ruling that VAT on e-books must be at member states’ higher, standard rates and requested a review of the position on the grounds that the European Parliament was not consulted on the legislative procedure for the compilation of the list of EU VAT exemptions. Poland's constitutional court also argued the ruling breached fiscal neutrality – meaning the purchase of a printed book versus an e-book equivalent should not be distorted by the differing VAT treatments imposed by the EU.

Richard Asquith, vice president of global tax at tax automation providers Avalara, said:  “The Polish challenge is the first in a number that are anticipated following the March ECJ ruling.  There was limited support for the verdict, and the commission is likely to encourage a new ruling which supports its own goal of boosting the EU digital economy.”

The UK complies with the EU directive on VAT and treats e-books as digital services, charging a 20% VAT on them. From the start of this year, a new European law on VAT came in, directing that VAT will be charged according to the country where customers are based, not the country the company is based.

Amazon began booking its UK-generated sales through the UK as opposed to its European headquarters in Luxembourg in May.

Politicians, booksellers and publishers in the UK have campaigned for an equal VAT rate to be levied on print and physical books, calling for a level playing field.