Indirect Tax Update

On 28 February 2023 the European Court of Justice (ECJ) published its decision in the case C-695/20 (Fenix International) concerned whether the operator of the platform has to account for VAT upon the full consideration paid for the services provided via this platform.

Generally, the ECJ attempted to bring the VAT treatment approach in line with the recent ViDA initiatives and justify the application of the legal fiction of the presumed supplier to the online platforms. Furthermore, this decision might have a noticeable impact on all operators of online platforms.

Facts of the case

The platform in case allows its users to provide audio and visual content for consideration or to access the content created by the service providers by paying regular or ad hoc fees. Although the content creators establish fees for their services themselves, Fenix sets the minimum amount of any types of payment, facilitates the process of collecting and distributing these payments and determines the general terms and conditions. For its facilitation services the platform charges commission which is deducted from each payment the service recipient makes.

The British tax authorities assessed VAT arguing that in the existing circumstances Fenix is presumed to be the supplier of the services provided and, thus, had to use the full remuneration for the services as a tax base and not just its commission. The platform operator appealed the assessment contending that Art. 9a(1) of Implementing Regulation No 282/2011 aimed to implement this rule has in fact altering effect and by virtue imposes tax burden for the platform operators not specified by VAT Directive. 


The Court has concluded that Art. 9a(1) of Implementing Regulation does not supplement or change VAT Directive (Art. 28) and, therefore, in essence, has supported the assessment of VAT upon the whole remuneration for the service provided and not only the “agency commission”.

The Court contends that the very Art. 28 of the VAT Directive has established the legal fiction stipulating that an intermediary involved in the provision of services in his or her own name but on behalf of another person is presumed to be the supplier of those services. Besides, in the Court’s opinion, Art. 28 of the VAT Directive has always covered all categories of services and, hence, presupposed to include electronically supplied services. Therefore, Art. 9a(1) Implementing Regulation shifting the tax liability from the actual service provider to the online platform does not create a new rule but clarifies the existing one.

The Court specifically points out that to estimate whether the legal fiction under Art. 28 of the VAT Directive applies, contractual arrangements must be analyzed as they constitute true reflection of economic and commercial realities of transactions. The disputable Art. 9a(1), in essence, follows the same logic providing the circumstances (examples) when the platform is presumed to be a supplier of the services and when this presumption can be rebutted. The mere fact that the final customer might be aware of the agency relationships and know the actual service provider cannot impact the conclusion, as it does not alter the economic substance and it is the platform who defines the essential elements of the supply (e.g., payment collection and distribution, general terms and conditions). 

How can KPMG assist?

Should you like to further discuss the content and potential impact of the Decision to your business, please contact one of our trusted advisors from the Indirect Tax Department at KPMG Cyprus.

KPMG’s Indirect Tax team provides advice and assistance at the Cyprus and international level. We structure our effort to dovetail with your business issues and strategy. Our focus is on supplying value adding and pragmatic advice rather than just a list of recommendations.

Our tax professionals are able to review your company’s current tax position and provide relevant advice and planning on a range of indirect taxes, including VAT, customs duties and excise taxes (such as tax audits, reorganizations and acquisitions, etc.). Furthermore, we can help your company with its administrative obligations and contacts with administrative bodies.

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