The Court of Justice of the EU has ruled in the Case C-695/20 | Fenix International.
Article 28 of the VAT Directive says that intermediaries, acting in their own name but on behalf of another person in relation to a supply of services, receive and make the supply. Article 9a of Regulation (EU) 2828/2011 states that intermediaries “taking part” in electronically supplied services through online platforms are presumed to be acting in their own name unless a provider is unambiguously specified, and invoices and receipts supplied. Article 9a also states that an intermediary that sets the terms and conditions of the supply cannot designate another person as the provider.
Fenix is registered for VAT purposes in the UK and operates the online platform Only Fans. Its users are divided into “creators” and “fans”. Fenix is responsible for collecting and distributing the payments made by fans, charging creators an amount of 20% of the sums paid by their fans by way of a deduction. In this case, Fenix charged and accounted for VAT on a tax base constituted by the 20% deduction.
HMRC took the view VAT should be paid on all the sums paid by the fans, not just the 20% deduction. It sent Fenix assessments for the VAT it considered was due. Fenix appealed and the tax tribunal referred the issue to the Court of Justice (this was before the end of the Brexit transition period). The tribunal asked if Article 9a that provides that an online intermediary linking service providers with their customers is, in principle, liable to pay VAT is valid in the light of the concept of ‘implementing power’ that the Council has under the Treaty on the Functioning of the European Union and the VAT Directive.
Last year, the Advocate General said that a regulatory provision that an online intermediary platform is, in principle, liable to pay VAT, is valid. The Court has now issued its ruling.
The Court stated that where a taxable person, who takes part in the supply of a service by electronic means, by operating, for example, an online social network platform, has the power to authorise the supply of that service, or to charge for it, or to set out the general terms of such a supply, that taxable person may unilaterally define essential elements relating to the supply, namely the provision of that service and the time at which it will take place, or the conditions under which the consideration will be payable, or the rules forming the general framework of that service. In such circumstances, and having regard to the economic and commercial reality reflected by them, it is correct that the taxable person must be regarded as being the supplier of services, under the VAT Directive.
The Court held that by adopting the contested provision of the implementing regulation, the Council merely clarified the VAT Directive, without supplementing or amending it. It found no factors to affect the validity of the contested provision of the implementing regulation.
