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France, Luxembourg Referred To ECJ Over VAT Rates

by Ulrika Lomas, Tax-News.com, Brussels

22 February 2013


France and Luxembourg have both been referred to the European Union (EU) Court of Justice for their application of reduced value-added tax (VAT) rates to e-books.

The European Commission took the decision after France and Luxembourg failed to heed warnings and bring their legislation into line with EU law. The provision of e-books is considered an electronically provided service and does not therefore qualify for reduced VAT rates under EU law. While the Commission is reviewing EU policy on VAT and will make proposals on reduced rates by the end of the year, it says that, in the meantime, it is "taking its role of guardian of the Treaties seriously by enforcing the rules of the Union."

According to the Commission,France and Luxembourg's failure to comply goes against the basic principle of EU tax policy. It also results in serious distortions of competition, to the detriment of traders from other EU Member States.

Commissioner Šemeta, responsible for taxation, said: "Questions concerning the tax treatment of physical books and e-books must certainly be tackled. And this is exactly what the Commission is doing as part of the wider review of reduced VAT rates. However, in the meantime, the Member States must play fair. Infringement of the VAT rules for e-books distorts the single market and runs counter to the fundamental EU principle of fair tax competition."

TAGS: court | compliance | Treaties | tax | European Commission | value added tax (VAT) | tax compliance | law | Luxembourg | enforcement | legislation | France | trade | European Union (EU) | Europe

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