The adoption of the e-publication directive follows the political agreement reached by the Council on 2 October. It opens up the possibility for member states to implement reduced VAT rates in their national law if they wish to do so.

Under the current VAT rules (directive 2006/112/EC), electronically supplied services are taxed at the standard VAT rate, i.e. minimum 15%, whereas publications on a physical support may benefit from non-standard rates.

For physical publications – books, newspapers and periodicals – member states currently have the option of applying a ‘reduced’ VAT rate, i.e. minimum 5%. Some have been authorised to apply ‘super-reduced’ VAT rates (below 5%) or ‘zero’ rates (which involve VAT deductibility).

The directive will allow member states that so wish to apply reduced VAT rates to electronic publications as well. Super-reduced and zero rates will only be allowed for member states that currently apply them to ‘physical’ publications.

Owen Meredith, Managing Director of the PPA, commented: “Formal adoption of these reforms by the EU Council, following political agreement in October, is further welcome news for publishers and consumers. This confirms that the Chancellor is free to extend zero-rates afforded to print publications to digital editions, and he should act at the earliest opportunity.

“We called on Philip Hammond to use these new freedoms in his Budget last month, where he reiterated the need for the tax system to keep up to date with the digital economy, but he has yet to do so. The PPA will continue to make the case for axing the digital reading tax and zero-rating ePublications and we urge the Government to act swiftly to end this perverse anomaly.”

The new rules will apply temporarily, pending the introduction of a new, ‘definitive’ VAT system. The Commission has issued proposals for the new system, which would allow member states more flexibility than at present in setting VAT rates.