On 2 October 2018, the European Council agreed a proposal allowing European member states to apply reduced, super-reduced or zero VAT rates to electronic publications.

The move means that the VAT rules for electronic and physical publications are alligned.

"This proposal is part of our efforts to modernise VAT for the digital economy, and enables us to keep pace with technological progress," said Hartwig Lager, minister for finance of Austria, which currently holds the Council presidency.

Under the current VAT rules (directive 2006/112/EC), electronically supplied services are taxed at the standard VAT rate, i.e. minimum 15%, whereas publications on a physical support may benefit from non-standard rates.

For physical publications - books, newspapers and periodicals - member states currently have the option of applying a 'reduced' VAT rate, i.e. minimum 5%. Some have been authorized to apply 'super-reduced' VAT rates (below 5%) or 'zero' rates (which involve VAT deductibility).

The directive will allow member states that so wish to apply reduced VAT rates to electronic publications as well. Super-reduced and zero rates will only be allowed for member states that currently apply them to 'physical' publications.

The new rules will apply temporarily, pending the introduction of a new, 'definitive' VAT system. The European Commission has issued proposals for the new system, which would allow member states more flexibility than at present in setting VAT rates.