France and Luxembourg lost their battle to apply reduced VAT rates to ebooks on Thursday when a top European court agreed with EU regulators that only paper books qualified for lower taxes, reports Reuters.
EU rules allow member states to set lower rates of value-added tax on printed books but the European Commission decided two years ago that the 5.5 percent and 3 percent rates imposed by France and Luxembourg respectively, were illegal.
The EU executive said reduced VAT rates did not apply to ebooks as they were an electronically provided service and were not in the list of goods and services granted this privilege.
The vast majority of the EU's 28 countries levy VAT rates ranging from 18 to 25 percent, according to Commission data.
VAT on paper books in contrast ranges from 0 to 10 percent, with the exception of three member states.
Judges at the Luxembourg-based Court of Justice of the European Union (ECJ) rejected France and Luxembourg's argument that ebooks should be considered a good rather than a service.
"The court finds that the VAT Directive excludes any possibility of a reduced VAT rate being applied to 'electronically supplied services'," they said.