As from 1 March 2016, the supply of electronic news services are VAT zero-rated in Norway. The zero-rating comprise all media that mainly contain news and current affairs, regardless of the platform used to distribute the news. News published on computers, mobile phones, tablets, radio and television are thus comprised by the exemption.
Supply of printed newspapers has been VAT zero-rated since 1970, while supply of electronic news services has been subject to 25 % VAT. Finally, the VAT treatment for news on paper and news on various electronic platforms are equal.
The main objectives of the exemption for printed newspapers has been to promote the democratic function of the media, including freedom of expression, and to preserve the Norwegian written language. Thus, the same objectives apply for newspapers etc. distributed on electronic platforms.
As the zero-rating could constitute state aid, a formal notification was sent from the Norwegian Government to the EFTA Surveillance Authority (ESA) in December 2015. ESA was of the opinion that the zero-rating does constitute state aid, but found that the exemption was compatible with the functioning of the EEA Agreement and thus approved the zero-rating.
The new legal provision and regulations
I would like to give you a short introduction to the new exemption that entered into force from 1 March. The wording in the Norwegian VAT Act Section 6-2 reads as follows:
- The supply of electronic news services shall be exempt from VAT
- The Ministry may issue regulations prescribing what is meant by “electronic news services”.
The Ministry has already issued regulations and according to the VAT Regulation section 6-2-1, services will be considered as “electronic news services” if they:
a) mainly include news and current affairs content from different areas of society
This condition concerns the medium’s content and is the principal condition for zero rating. The condition correspond to the zero-rating on printed newspapers, as laid down in administrative practice. According to practice concerning printed newspapers, the publication must provide relevant news, i.e. information of general public interest, such as politics, cultural matters and economics.
Publications that predominantly provide information about only one sector or one interest, e.g. culture, religion, sport or occupation, will therefore not meet this requirement and will not be comprised by the exemption.
For news broadcasting through television or radio, the zero-rating will only apply to channels that mainly broadcast a broad range of news. It is my understanding that TV2 Nyhetskanalen, BBC World, Al Jazeera and CNN are comprised by the VAT zero-rating from March 1.
b) has the general public as target audience
This condition implies that the zero-rating will not include media which primarily are aimed at members or employees of specific organisations, companies or associations etc.
c) has an editor in chief
The criteria is meant to ensure editorial and journalistic quality and trustworthiness of the media and consequently promote the democratic function of news media. Blogs and non-editorial services like social media and content generators do in general not have an editor in chief and will thus not be subject to zero-rating.
d) is published at least once a week.
The rationale for this criterion is that with fewer publications, the medium does not inform the public about current events and on-going public debate. The Directorate of Taxes has also emphasised that the published content has to be self-produced material.
The VAT zero-rating will also be applicable for foreign news service providers given that the criterions for zero-rating are met.
Delimitations of the exemption
The Directorate of Taxes has issued guidelines that outlines some delimitations of the exemption. I will shortly comment on the limitations below:
In order to have VAT liable activity, you have to have turnover, i.e. supply of goods or services for consideration. The electronic news providers often gives free access to some of its content. The Directorate of Taxes has stated that it is the content supplied for consideration that will be relevant and the payable content will thus have to meet the criterions mentioned above. Hence, the new rules will not imply any change for free online papers.
Supply of access to a single article and archives
The supply of access to one single article will not be comprised by the zero-rating, as one single article will not meet the requirement for broad coverage of news and current affairs and will not be published at least once a week. As many newspapers are selling access to single articles, this is an unfortunate limitation. One consequence may be that the consumer get access to the whole newspaper when wanting access to one article in order to avoid 25 % VAT on the article.
Further, the supply of access to the news providers’ archives will not be comprised by the exemption. The reason being that articles etc. from the archive will not meet the requirement of current affairs.
As mentioned, the exemption will also be applicable for news broadcasted on television. The Directorate of Taxes has stated that when news channels are supplied as part of a package containing several TV channels, the invoice will have to be split to reflect the VAT zero-rated news channels and the VAT liable entertainment channels. Thus, the principle service doctrine will not be applicable for the supply of packages of TV channels. Only the future will tell if the prices to the consumers are reduced due to the exemption or if the providers will increase their profit.
The way forward
Several other delimitation questions will have to be clarified through practice going forward. The Directorate of Taxes has actually stated that they find it better to clarify some of the questions that arise from the new exemption through practice, rather than giving guidelines in advance.
I am happy that the VAT treatment of the supply of news services are now equal, regardless of the platform used to distribute the news! However, it is uncertain whether the zero-rating will benefit the consumers or if it will entail increased profits for the news service providers.
Please feel free to leave a comment below if you have any questions or comments.
Ta gjerne kontakt med meg dersom det er noe du lurer på.
My name is Synne Hangeland and I work as a lawyer at PwC Tax and Legal Services. I assist clients with general VAT advice on Norwegian and international VAT matters, as well as in connection with national and cross border restructurings. I have worked at PwC Tax and Legal Services since 2013. If you have any questions, comments or input, feel free to contact me!