Case C‑479/13

European Commission

v

French Republic

(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

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 and 98(2), second para. and Annex III, point 6)

A Member State which applies a reduced rate of value added tax to the supply of digital or electronic books fails to fulfil its obligations under Articles 96 and 98 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, a 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, that 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.

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 27, 28, 33-36, 42, 43, 46, operative part)