Still a patchwork: VAT Application to Copyright Levies

Several aspects of the French copyright levy system are currently under scrutiny. While the Directorate General for Competition, Consumer Affairs and Fraud Control (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes DGCCRF) of the Ministry of Economy is examining the financial flows, the Directorate General of Public Finance (Direction Générale des Finances Publiques DGFIP) of the Ministry of Finance has taken another look at the issue of VAT application. What appears to be a rather mundane administrative process is producing explosive results. In both cases, a lot of money is at stake: money that consumers pay, and money that collecting societies collect and distribute. In between, there are companies that are trying to continue to comply with the law.

• The DGCCRF's audits include, among other things, the refunding of copyright levies for commercial users. A review of the process appears necessary because the levies are initially applied to all products. However, public bodies, institutions and companies can reclaim them – in France as well as in other countries – after the products have been purchased. This process has not been working as it should for many years.
• The DGFIP's audits reveal a demarcation in the calculation of VAT that raises far-reaching questions. In line with European case law, the DGFIP confirms that VAT does not belong to the rights holders. However, it may be applied in all invoices for products subject to the levy. This interpretation of a far from new ruling by the European Court of Justice seems at the very least idiosyncratic. According to the previous interpretation of the ruling, the levy may not be added to the product price before VAT is applied (but afterwards). Otherwise, an amount – in France exactly 20 per cent of the levy itself – remains, so to speak, vacant. It is not invoiced by the collecting societies representing the rights holders.

1cc has reported several times on the application of VAT to copyright levies following the ruling of the European Court of Justice. The ruling should have clarified the matter. However, it is obvious that the ruling has not had this effect, even to this day.

Please feel free to contact us if you have any questions about the different labelling and information obligations under national and European regulations for manufacturers, importers and retailers.