EU Value-Added Tax Changes and Proposed Obligations for Platforms

Online platforms are playing an ever increasing role in the economy. They’re used to sell goods via the internet—e-commerce—and in the so-called sharing economy various services are provided via platforms.

The role of platforms in collecting VAT has increased gradually in the EU. Since 2015, platforms facilitating provision of digital services have been liable for collecting VAT, and e-commerce platforms facilitating certain sales of goods became liable for payment of VAT from July 1, 2021. The role of platforms in collecting VAT will be further extended if proposed EU VAT rules come into effect from 2025.

VAT Liability of Platforms

Whether a platform seller or the platform facilitating the sale becomes accountable for VAT depends on various factors.

The platform that acts as an intermediary in its own name but on behalf of an underlying seller is presumed to be the supplier of those goods or services, and thus liable for the payment of VAT on those supplies. Consequently, if the platform acts in its own name when facilitating a sale of goods or provision of services to the customer, the platform generally becomes liable for the payment of VAT.

The platform may be considered as acting in its own name if, for example, it engages with customers, receives orders, is involved in sending or returning goods or in the delivery of the services, provides customer care, authorizes payments, issues invoices to customers, or sets the terms and conditions of supplies.

In addition, even if a platform doesn’t act in its own name, it can still become liable for VAT on the underlying sale if it is considered the seller by a fiction or, in other words, is a deemed supplier of the goods or services sold via its platform.

If the VAT fiction applies, the platform is considered as acquiring the goods or services from the actual supplier and re-selling them to the customer. The VAT fiction or deeming provision makes the platform responsible for VAT collection on the supply to a customer even where contractually the platform isn’t a party to that supply.

This fiction currently affects platforms which facilitate the provision of digital services or sales of certain goods through the platform.

Supply of Digital Services

Article 9a of Council Implementing Regulation (EU) No 282/2011 provides that a platform facilitating supplies of digital services is “presumed to be acting in his own name but on behalf of the provider of those services” and thus liable for VAT payable on those services. That presumption can be rebutted where the underlying provider of services is explicitly indicated as being the supplier and where that is apparent from the contractual agreements between the parties.

Further, this presumption can only be rebutted if the platform isn’t involved in the delivery of the service and isn’t doing any of the following:

• Issuing invoices or receipts to the final customer;
• Setting the terms and conditions of the supply;
• Authorizing the charge for the payment made by the consumer.

CJEU Confirms VAT Liability of Platforms

Fenix International, a company registered in the UK for VAT purposes, challenged the validity of this presumption applicable to platforms facilitating provision of digital services.

However, in its judgment (C-695/20), the Court of Justice of the European Union ruled in favor of the UK tax authorities and held that the presumption of EU VAT liability of platforms based on Article 9a of Council Implementing Regulation (EU) No 282/2011 should be considered valid. The CJEU ruled that the council didn’t exceed the limits of its implementation powers in specifying that the operator of a platform is presumed to be the supplier of the services provided.

This meant that Fenix became liable for VAT payable on the digital services provided via its platform, not only on the facilitation fee it charged.

Supply of Goods

From July 1, 2021, the facilitating platforms are considered deemed suppliers if the following conditions are met:

• Low-value goods are imported in the EU, irrespective of where the seller is established.
• Goods are supplied from a location in the EU, if the seller is not established in the EU.

New Rules Proposed by ViDA

The VAT in the Digital Age proposal further extends the VAT liability of platforms that will be made liable for charging and remitting the VAT when they facilitate:

• A supply of passenger transport or short-term accommodation when their underlying suppliers will not charge VAT; and
• A business-to-consumer and business-to-business sale of goods (e-commerce) from a location in the EU, irrespective of where the seller is established.

In addition, the import one-stop-shop becomes obligatory for platforms facilitating low-value imports into the EU. The IOSS was introduced as an optional scheme for facilitating marketplaces in July 2021 and is proposed to become mandatory from Jan. 1, 2025.

For more detailed information about the proposed EU VAT rules, please consult our recent article on the ViDA.

Conclusion

Under the current rules, a platform facilitating the sales of goods or services can become liable for the payable VAT if it acts in its own name when facilitating a sale of goods or provision of services, or if it is a deemed supplier under the EU VAT legislation.

The liability of platforms is further extended under the proposed ViDA rules by making them suppliers by fiction when they facilitate, through their marketplaces:

• Short-term accommodation or passenger transport services; or
• Certain sale of goods (e-commerce).

The EU institutions and member states seem to generally support the ViDA proposals, therefore the extension of platforms’ VAT liability is expected from 2025.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Aiki Kuldkepp is senior manager, tax, with Grant Thornton Netherlands.

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