Taxes If You Sell E-books In Spain
Law and Tax Changes
What taxes should you pay if you sell e-books in Spain? Let’s start from the beginning…
It is commonly known that the VAT applicable to books, newspapers and magazines in physical support is the super-reduced rate of 4%, benefiting from preferential treatment for VAT purposes.
Here we should include the book in physical support (the book on paper) and the electronic book in physical support (CD, USB, DVD).
But what happens with the electronic “online” book or e-book? That is, those that we download from a web platform without including physical support. These books are taxed at 21%.
Delivery of goods or service provision?
And you will ask if both are books, why do they have that different treatment? Well, basically because of a conceptual issue:
- The delivery of a book in hardware is considered the delivery of goods. Only the deliveries of goods consisting of books, newspapers and magazines benefit from the super-reduced rate of 4%.
- The purchase of an online e-book is considered a service provision carried out electronically relative to the transmission of the digitized content of books. Therefore not being a delivery of goods, it cannot benefit from the 4% rate.
This tax difference is justified in the distribution costs between the physical book and the e-book. The costs of distribution of the e-book are much lower than those of the physical book and may even have lower prices for the final consumer, even if they are taxed at a higher tax rate.
Why not apply the same 4% VAT to e-books?
There are many professional associations in which there is unanimity on the matter of lowering to 4% the tax rate applicable to e-books for two reasons:
- When the VAT on cultural products has been lowered, consumption has increased,
- and in addition, this would solve the problem, which is only having considered different products of the same nature.
But the resolution of the problem has been prolonged over time because it is a Community competence. Therefore, national governments cannot apply singular VAT regimes since otherwise, it could lead to uncontrolled competition between countries.
The Council of the EU modifies Directive 2006/112 /EC
The good news is that the Council of the EU, in Directive 2018/1713 of 6 November 2018, modifies Directive 2006/112/EC as regards the rates of value-added tax applied to books, newspapers and magazines, considering the following:
- Directive 2006/112/EC of the Council establishes that Member States can apply a reduced value-added tax (VAT) rate to publications in any medium of physical support. However, a reduced VAT rate cannot be applied to electronic publications, which should be subject to the standard rate.
- According to the Commission Communication of 6 May 2015 on a Strategy for the Digital Single Market in Europe and to keep abreast of technological developments in a digital economy, Member States should be able to match VAT rates applied to publications electronically with the reduced VAT rates in force for publications provided through physical support.
Directive 2006/112/EC details
Based on these considerations, Directive 2006/112/EC is worded as follows:
«The reduced rates will not apply to the services provided electronically, except for those contemplated in point 6) of Annex III.»
Point 6), Annex III:
«Supply, including loan in libraries, of books, newspapers and magazines, either in any medium of physical support, either electronically, or in both forms (including brochures, leaflets and similar printed material, children’s picture and drawing and colouring books, printed or handwritten music, maps, plans and hydrographic surveys and the like), which are not entirely or predominantly publications intended for advertising and which do not consist entirely or predominantly in video content or audible music.»
To sum up…
To resume, the Council of the EU has pronounced and allowed the countries that wish to apply the reduced VAT to electronic publications (e-books), comparing its encumbrance to traditional books.
Now it is time to apply the measure to Spain, a step we fear we must wait for.
But even if it takes time, it is a measure that will be approved because there is a broad consensus among the parliamentary groups. We are also the tenth country with the highest VAT in Europe for digital publications.
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