Case C‑502/13

European Commission

v

Grand Duchy of Luxembourg

(Failure of a Member State to fulfil obligations — Taxation — VAT — Application of a reduced rate — Supply of digital books or electronic books)

Summary — Judgment of the Court (Fourth Chamber), 5 March 2015

1.        Harmonisation of fiscal legislation — Common system of value added tax — Discretionary power of the Member States to apply a reduced rate to certain supplies of goods and services — Application of a reduced rate to the supply of digital or electronic books — Not permissible

(Council Regulation No 282/2011, Art. 7(1); Council Directive 2006/112 as amended by Directive 2010/88; Art. 14(1), 96, 97, 98(2), second para., 99, 110 and 114 and Annex III, points 6 and 9)

2.        Actions for failure to fulfil obligations — Disregard of the obligations imposed by a directive — Defences — Challenge to the lawfulness of the directive — Inadmissibility — Limits — Non-existent act

(Art. 258 TFEU, 259 TFEU, 263 TFEU and 265 TFEU)

3.        Harmonisation of fiscal legislation — Common system of value added tax — Discretionary power of the Member States temporarily to apply a reduced rate — Application of a reduced rate of 3% to the supply of digital or electronic books — Not permissible

(Council Directive 2006/112, as amended by Directive 2010/88, Art. 98(2) and 110)

1.        A Member State which applies a rate of value added tax of 3% to the supply of digital or electronic books fails to fulfil its obligations under Articles 96 to 99, 110 and 114 of Directive 2006/112 on the common system of value added tax, as amended by Directive 2010/88, read in conjunction with Annexes II and III to that directive and Regulation No 282/2011 laying down implementing measures for Directive 2006/112.

It is clear from the terms of point 6 of Annex III to Directive 2006/112 that the reduced rate of value added tax is applicable to a transaction consisting of the supply of a book on a physical medium. Admittedly, in order to be able to read an electronic book, physical support, such as a computer, is required. However such a support is not included in the supply of electronic books. In addition, it is clear from the second subparagraph of Article 98(2) of that directive, the EU legislature decided to exclude any possibility of a reduced rate of value added tax being applied to electronically supplied services. The supply of electronic books is such a service, given that it cannot be regarded as a supply of goods within the meaning of Article 14(1) of that directive, since electronic books cannot qualify as tangible property. Likewise, the supply of electronic books clearly meets the definition of electronically supplied services set out in Article 7(1) of Regulation No 282/2011. Moreover, such a supply is not covered by point 9 to Annex III of directive 2006/112, which relates to the supply of services by writers, composers and performing artists, or of the royalties due to them.

That interpretation cannot be undermined by the principle of fiscal neutrality, since that principle cannot extend the scope of reduced rates of value added tax in the absence of clear wording to that effect. Point 6 of Annex III to Directive 2006/112 is not a provision which, unequivocally, extends the scope of reduced rates of value added tax to the supply of electronic books. On the contrary such a supply is not covered by that provision.

(see paras 35, 36, 40-43, 50, 51, 61,71, operative part)

2.        See the text of the decision.

(see paras 56, 57)

3.        See the text of the decision.

(see paras 66, 67)