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Germany: Local tax authorities note access to electronic publications is separate, not ancillary, to print

Eveline Beer, of Küffner, Maunz, Langer, Zugmaier, explains the reasoning behind the notification of the Bavarian tax authorities that the provision of access to e-papers or e-books and the subscription to a printed version of the same product should be treated as separate services.

The Bavarian view means the consideration paid has to be separately apportioned between the printed product and the e-paper or e-book. Printed newspapers and books are subject to the reduced VAT rate, while access to e-papers or e-books has to be taxed with the standard VAT rate.

Additional access to e-paper and e-book

Publishers now offer their customers not only subscriptions to the printed version of newspapers and magazines, but also access to the electronic version of the various products. In return for this combination, the customer either pays a lump sum or an additional consideration is agreed for the e-paper or e-book. In this respect, the customer often pays the (regular) unit price for the printed subscription, with a rebate granted for the added e-paper (that is, the price for the e-paper, in combination with the printed subscription, is lower than if the customer had only purchased the electronic product).

The Bavarian local tax authorities have issued a notification dated June 12 2014 regarding the proportion of the consideration for the combination of printed subscriptions with e-papers.

No uniform single service

According to the local tax authorities, the provision of printed newspapers or printed books combined with electronic access to the e-papers or e-books cannot be regarded as a uniform single service. In fact, the services have to be evaluated separately from each other.

No ancillary service

The additional access to the electronic version of a printed product cannot be regarded as ancillary to the main service “provision of a printed product”. The access to the e-paper or e-book serves a separate purpose, from the perspective of the customer and is not only purchased as a means by which to better enjoy the main service. As an example of the separate purpose of the electronic access, the Bavarian local tax authorities state that access to the e-paper or e-book allows all family members to use the media at the same time regardless of the existing geographical conditions.

Consequently, access to an e-paper or an e-book, in addition to the printed newspaper or the printed book, has to be regarded as a separate electronically provided service.

Additional consideration agreed for access to the electronic product

If a customer pays a separate consideration for the additional access to an e-paper or an e-book, this separate payment is regarded as consideration for the electronically provided service.

If the publisher grants a rebate for access to the electronic product, this is not treated as being a reduction of the total purchase price for the combined product. Rather, the reduced price is regarded as consideration for the electronically provided service.

Consideration in the case of a lump sum payment

If a lump sum is agreed for the printed subscription or the printed book combined with access to the e-paper or e-book, the total lump sum has to be separately apportioned between the provided services. In this respect, the proportion of the unit purchase prices for the printed product and the electronic product has to be considered (section 10.1 paragraph 11 German VAT Circular). However, other methods may also apply, provided they lead to reasonable results.

VAT rate

Generally, the provision of printed newspapers or printed books is subject to the reduced VAT rate of 7%. However, access to e-papers or e-books has to be taxed with the standard VAT rate of 19%.

Eveline Beer (eveline.beer@kmlz.de) is a lawyer and certified tax consultant with Küffner Maunz Langer Zugmaier, the principal German correspondents for the Indirect Tax channel of www.internationaltaxreview.com.

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