Higher tax rate imposed on DRM-ebooks under new French law

France has passed an amendment to its tax laws that increases the tax rate for ebooks with digital rights management (DRM), reports Le Nouvel Observateur. The amendment, which will come into force in 2015, means that ebooks without DRM will continue to be taxed at the same rate as print books at 5.5% (set to rise to 7%), while ebooks with DRM will be taxed at the standard VAT rate of 19.5%. The amendment treats ebooks with DRM as a service under the VAT rate, arguing that a locked book does not give readers property rights but rather a license with conditions that are set by the seller. France’s laws do not comply with the European Union, which considers all ebooks as a service under VAT. Under current EU rules, governments can apply reduced VAT rates to a limited list of goods and services, which includes print books but does not currently include ebooks. According to the Meridian, the European Commission has referred France to the European Court of Justice on the matter and may impose fines on the country. However, under new EU tax laws to be introduced in 2015, print books and ebooks will be taxed at a lower rate similar to France’s current rate. The new EU laws will also require retailers to collect taxes based on the customer’s location rather than where the retailer is based, which will close loopholes enjoyed by retailers that base their businesses in Luxembourg to avoid paying taxes. 

Category: International news