Germany Annual Tax Act 2019 – Reduced VAT rate on eBooks

The VAT rate for eBooks and similar electronic products has been reduced to 7% according to the Annual Tax Act 2019 that was passed by the German Parliament on 7 November 2019 and later approved by the German Federal Council on 29 November 2019.This change will directly benefit the electronic publishers from the Member States. The purpose of the reduction in VAT is to bring equilibrium in the market by imposing the same VAT on the physical and electronic products in the same category. The other impact would be on the subscriptions and memberships as the competitive pricing will help in achieving higher numbers. However, this new practice still needs some clarification.

Some other points Digital Publication Companies should take into account

• It only applies to electronic publishers such as eBooks, newspapers, magazines and other similar products.
• Publications that include a segment of multimedia and a segment of reading will benefit in the new provision.
• The new rate is reduced from 19% in the past to 7% which is a significant reduction.
• Publications consisting mostly of audio music and video contents will not benefit from the reduced VAT.
• Similarly, the reduced rate doesn’t apply to the publications that are mainly into the advertising business.  

This reduction in VAT will ensure that the electronic publication and the physical publication are treated equally. It will also help in the growth of electronic readers which are already on a rise and provide them a sense of security that they are treated the same way. It will act as a motivational tool to promote reading electronically. The electronic readers will benefit significantly with the new provisions passed in the Annual Tax Act 2019.

The new regulations of reduced VAT came into effect on 18 December 2019.

Global VAT Compliance specialises in helping international business be VAT compliant around the world offering VAT solutions to Electronic Publishers, so if you can foresee these developments impacting your business, do not hesitate to contact us.

Related services: