UK To Retain 'Uncompetitive' VAT Rate On E-books

by Jason Gorringe, Tax-News.com, London

27 December 2011

The UK Treasury has confirmed that it will not follow its European peers in slashing the value-added tax rate it places on electronic books sold on the Internet, commonly known as e-books, following recent decisions by the governments of France and Luxembourg, which may establish them as domiciles of choice for Internet e-book retailers in Europe.

Luxembourg has recently announced that it will cut the value-added tax rate applicable to e-books to 3%, from 15%, in line with the rate that is applicable to hard copies. Presently, the rate is based on the seller's country of origin, rather than the location of the buyer, meaning that the UK government is set to lose out on tax as the disparity widens between the tax rate applied to tangible book sales in UK bookstores and their Internet counterparts based in other nations.

These rules however are set to change from 2015, with the value-added tax rate to be that applicable in the buyers' country of origin. Despite the two-year transitional period, the UK government has confirmed that the rate applied to e-book sales will remain as the standard value-added tax rate, currently 20%, stating its belief that - despite the decisions from the French and Luxembourg governments - European law does not permit such a concessionary rate.

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