EU agrees on lower sales tax for e-books, online papers (UPDATE 1)

European Union finance ministers decided on Tuesday to allow lower sales taxes on e-books and other digital publications and to align them to reduced levies applied to paper versions of books and magazines.

The deal will allow EU states to apply reduced or even zero VAT rates to electronic publications, which are currently taxed at a minimum of 15 per cent because they are treated as electronic services.

"This proposal is part of our efforts to modernise VAT for the digital economy, and enables us to keep pace with technological progress," said Austrian Finance Minister Hartwig Loeger, who chaired the meeting.

The agreement comes after more than two years of talks after a European Commission proposal. The European Parliament supported the plan a year ago.

"This is good news for the press and for the culture sector," EU Economic Commissioner Pierre Moscovici commented on Twitter after the deal was reached.

Very low or zero rates will only be allowed "for member states that currently apply them to physical publications," the EU Council said in a note.

The new rules will apply temporarily until a comprehensive reform of the VAT system in the EU is approved.

The overhaul proposed by the Commission would give EU states more flexibility in setting VAT rates.