Sudoku books qualify for reduced VAT rate

Facts

Keesing Deutschland GmbH marketed printed sudoku books, held together by staples, approximately every eight weeks, each containing a preface, a legal notice, an explanation of sudoku rules and 88 sudoku games. The games consisted of grid patterns in which some numbers had already been entered and which had to be completed with further numbers according to certain rules. Keesing applied a reduced VAT rate to sale of the sudoku books pursuant to § 12 (2) No. 1 in conjunction with Annex 2 No. 49 (b) of the German VAT Act (UStG), since it took the view that they were periodicals [in German: "periodische Druckschriften" - "periodical printed writings"] falling under tariff heading 4902 of the Combined Nomenclature (CN).

However, the tax authorities argued that this was not a case of "printed writings" [in German: "Druckschriften"], since the books did not contain any qualifying text. They were therefore to be classified as "Other printed matter, including pictures and photographs" under CN heading 4911, which is not referred to in Annex 2 to the UStG. The sudoku books should therefore be taxed at the standard rate of 19%.

The fiscal court referred the question to the ECJ of whether CN heading 4902 requires printed matter to consist predominantly of sequences of letters, so that books containing sudoku number games cannot be subsumed under this heading. In the event that sudoku books do not fall under this heading, it should be clarified whether the principles of equal treatment and neutrality require sudoku books to be taxed at a reduced rate in the same way as letter sudoku games and crossword books.

Background

Article 98 (1) and (2) of the VAT Directive allows EU Member States to apply one or two reduced VAT rates to the supply of goods listed in Annex III to the VAT Directive. Under point 6 of Annex III, books, newspapers and periodicals, plus other items, may be taxed at a reduced rate (with restrictions). According to Article 98 (3) of the VAT Directive, Member States may define the categories of goods to be exempted on the basis of the Combined Nomenclature (CN). Germany has made use of this option and, in Annex 2 to § 12 (2) UStG, has categorised the goods eligible for reduced VAT according to CN classification.

The Combined Nomenclature (CN) is the European Union's central instrument for classifying goods for purposes of customs and foreign trade statistics. It was first introduced by Regulation (EEC) No 2658/87 and is based on the Harmonised System (HS) of the World Customs Organisation, expanded to include EU-specific subdivisions. The Harmonised System is the subject of an international Convention in which the contracting parties have undertaken to bring their customs tariff nomenclature and statistical nomenclatures in line with the HS. The Convention contains Explanatory Notes on, inter alia, Chapter 49 of the HS, which deals with printed publications. The final clause of the Convention makes clear that the French and English versions of the Convention are both equally binding.

ECJ ruling

Since the German legislator had utilised the option of classifying items subject to reduced taxation according to the CN, it fell to the ECJ to provide the German court with the criteria for classification. In this context, the wording of the headings and the notes to the sections or chapters were determining. First of all, the ECJ noted differences between the French, English and German language versions. These read as follows:

• French (English translation taken from ECJ judgment in case C-375/24): Newspapers and periodical printed publications, whether or not illustrated or containing advertising.
• English: Newspapers, journals and periodicals, whether or not illustrated or containing advertising material.
• German (English translation taken from ECJ judgment in case C-375/24): Newspapers and other periodical printed writings, including those containing images or advertising.

Here, the German word used for periodicals is "Druckschriften", whereby the component "-schriften" could be understood to mean "writings".

In the event of discrepancies between language versions, provisions must be interpreted in accordance with the actual intention of the author and the purpose pursued. The purpose of the CN is to implement the Harmonised System in unchanged form. Since the final clause of the HS Convention stipulates that the French and English language versions are binding, these language versions should also be used as the primary basis for interpreting CN heading 4902. These wordings refer to what could be described as "printed publications"; this does not imply that they must consist predominantly of text. Furthermore, according to the Explanatory Notes to the relevant HS heading, publications under CN heading 4902 "usually" contain "reading matter", but publications with content other than text are also covered.

Only in a second stage should all official languages of the EU be compared for interpretation purposes. Such a comparison shows that only the German version refers to "Druckschriften", with the suggesting the meaning of "writings", or written text.

Overall, therefore, sudoku books may be classified under CN heading 4902. The question of whether a reduced rate of VAT would otherwise be required based on principles of neutrality and equal treatment was therefore no longer relevant.

Conclusion

The ECJ judgment is interesting in two respects:

Firstly, it clarifies that the German word component "-schriften" does not necessarily imply text. Alphabets and number systems of all kinds, shorthand symbols, Morse code or similar code symbols, braille, musical notes, etc. are also included.

Secondly, the ECJ has ruled that the French and English versions of the CN have precedence when interpreting the CN. In so doing, it refers to an ECJ ruling of almost thirty years' standing, namely the decision in Knubben Spedition, case C-143/96 of 9 December 1997, paragraph 15. As far as can be discerned, the ECJ has not applied this principle since then.

Author: Nadia Schulte