VAT and digital platforms facilitating supplies of services: Act in own name?
Fernando Matesanz of Spanish VAT Services considers Article 9a of the VAT implementing regulation and whether an intermediary such as a digital platform acts in its own name or in the name of another person.
It is likely that we will soon have the decision from the European Court of Justice (ECJ) on the Fenix case (C-695/20). The question referred to the ECJ by the UK seeks to clarify whether the provisions of Article 9a of the VAT implementing regulation, related to the role of digital platforms intermediating in electronically supplied services, exceed the scope of Article 28 of the VAT Directive.
While the question referred to the ECJ sounds complicated, in practice, everything seems to indicate that the ECJ will, in some way, rule when an intermediary such as a digital platform acts in its own name or in the name of another person.
The ECJ's decision on this issue will have an impact on the so-called sharing economy for which the industry is anxiously awaiting the ruling.
Although the expectations about the scope of this decision are wide, it is possible that its impact will be limited since Article 9a of the VAT implementing regulation refers to electronically supplied services (from the principal to the platform and from the latter to the customer).
Therefore, in cases where the service in question does not qualify as electronically supplied, which indeed does happen on many occasions, the provisions of Article 9a should, in principle, not apply. It is possible that, due to the degree of human intervention, the services provided through digital platforms are not considered to be provided electronically. This situation is seen every day in the case of educational, healthcare and, to a lesser extent, financial services.
Accordingly, there may soon be a solution regarding the role of the facilitating platforms when intermediating electronically supplied services. This will be a step forward in the taxation of the sharing economy. However, what happens when dealing with non-electronically supplied services? If we consider that the platform provides an intermediation service, does it do so on its own name or in the name of another person?
According to Article 28 of the VAT Directive, where a taxable person acting in its own name takes part in a supply of services, it shall be deemed to have received and supplied those services itself. This is to say that a deemed provision occurs, for which it should be considered that it receives the service from the supplier and, at the same time, supplies the very same service to the final consumer.
In this regard, it is important to recall that a taxable person acting in its own name, is referring to what is normally known as ‘undisclosed agent’. The term ‘undisclosed agent’ specifically refers to the fact that the person acquiring the service is not aware of dealing with an intermediary but with the principal of the service (the final consumer acquiring the services does not have knowledge that the agent is acting on a principal’s behalf).
It is arguable whether this occurs in the sharing economy as, in most cases, the final consumer is aware that, on the one hand, there is a service provider (for example a driver who provides transportation services) and, on the other hand, there is an intermediary that puts the consumer in contact with that service provider.
In this respect, the ECJ decided in the case C-734/19 that for the application of Article 28 of the VAT Directive, the services acquired by the commissionaire should be identical to the ones delivered to the principal.
It is again arguable whether the above occurs in many of the business models of the sharing economy. The services supplied by the platform are in most cases much wider than the services supplied by the principal. In these cases, the application of Article 28 of the VAT Directive could be problematic.
However, the non-application of this article in cases of intermediation of platforms in the provision of services could become even more problematic after the implementation of the new VAT rules for e-commerce transactions.
In these cases, a de facto provision has been established whereby the facilitating platform is deemed to receive and deliver the goods being sold online. It can therefore be argued that to be consistent, the same conclusion should be made in cases of supplies of services. However, neither the regulations currently in force nor the ECJ´s case law appear to support this idea in a clear way.
Far from being the solution, it is foreseeable that the ECJ’s decision in the Fenix case will be the starting point for further discussions on the subject since the number of business models in the sharing economy seem to be currently unlimited.
Managing director, Spanish VAT Services