UK: Regulation providing online platform is liable to pay VAT is valid (CJEU judgment)

The Court of Justice of the European Union (CJEU) today released an opinion holding that a value added tax (VAT) regulation that presumes a taxable person taking part in the electronic supply of services through a telecommunications network (e.g., online interface or portal) to be the provider of those services, and thus liable to pay VAT on the supply of such services, is valid.

The case is: Fenix International (C-695/20)

As explained in a release [PDF 93 KB] from the CJEU:

• The taxpayer, which is registered for VAT purposes in the United Kingdom, operates an online platform that is offered to “users” from around the world, who are divided into “creators” and “fans.” The taxpayer provides not only the platform but also the device enabling collection and distribution of payments made by the fans. 
• The taxpayer levies 20% on any sum paid to a creator to whom it charges a corresponding amount, and the taxpayer applied VAT with respect to such levies. 
• The UK tax authority sent the taxpayer assessments for VAT due for a period between 2017 and 2020, not just on the basis of the 20% deduction, but of all the sums paid by fans, based on the VAT regulation presuming the taxpayer to be the provider of the services provided on its platform.
• The taxpayer filed an appeal before a UK court challenging the validity of the legal basis for the assessments. That court referred a question to the CJEU for preliminary ruling as to whether the VAT regulation under which the assessments were made is invalid as supplementing or amending the VAT Directive and thus exceeding the implementing powers.
• The CJEU held that the VAT regulation only clarified the VAT Directive, and did not supplement or amend it, and thus was valid. The court explained that:
  • The VAT Directive establishes that a taxable person who, in the context of a supply of services, acts as an intermediary in his or her own name but on behalf of another person, is presumed to be the supplier of those services.
  • The implementing VAT regulation at issue in this case provides that a taxable person taking part in the supply of electronically supplied services through a telecommunications network (e.g., online interface or portal such as a marketplace for applications) is “presumed to be acting in his own name but on behalf of the provider of those services.”  That presumption can be rebutted where that provider is explicitly indicated as being the supplier by the taxable person and where that is apparent from the contractual agreements between the parties.
  • In contrast, a taxable person taking part in that supply is always presumed to be acting in his or her own name but on behalf of the provider of those services and, therefore, is deemed himself or herself to be the supplier of those services, when he or she authorizes the charge to the customer or the delivery of those services or sets the general terms and conditions of that supply.