On April 10 2025, a European Court of Justice advocate general (AG) issued his opinion in Case C-101/24, Finanzamt Hamburg-Altona v XYRALITY GmbH. The case addresses the VAT treatment of services supplied electronically via a digital marketplace, focusing on the application of Article 28 of the VAT Directive and the determination of the place of supply under articles 44 and 45.
The underlying facts concern the German video game developer Xyrality, which, between 2012 and 2014, distributed mobile applications through an online app store operated by a company established in Ireland. All app purchases were processed, confirmed, and billed entirely through this Irish-based digital platform. Initially, the developer declared and paid VAT in Germany. However, in 2016, it submitted corrective VAT returns, arguing that Article 28 of the VAT Directive applied. Under that provision, the app store should be treated as the supplier to final consumers, thereby shifting the place of taxation.
Article 28 of the VAT Directive establishes a legal fiction. Where a taxable person acting in its own name but on behalf of another is involved in a supply of services, that person is deemed both to have received and subsequently supplied the service. This provision is designed to clarify the VAT obligations in complex supply chains, particularly in contexts where intermediaries operate between the supplier of a service and the final customer.
Case analysis: the application of Article 28
One of the core questions raised in this case was whether the criteria for applying Article 28 were met during the period prior to 2015; specifically, before the entry into force of Article 9a of Council Implementing Regulation (EU) No. 282/2011.
The AG concluded that Article 9a, despite being formally applicable only from January 1 2015, did not introduce new legal principles but merely clarified the interpretation of Article 28. This view aligns with the Court of Justice of the European Union’s decision in Fenix International, in which the court confirmed that Article 9a reflects, rather than expands upon, the scope of Article 28.
A key issue addressed in paragraph 26 of the AG´s opinion concerns the visibility of the actual service provider. The AG clarified that the legal fiction under Article 28 does not collapse simply because the end user can see the name of the developer. In other words, whether the intermediary is disclosed or undisclosed is not decisive; the focus must be on who exercises control over the transaction.
From a practical perspective, the entire customer journey (from downloading the application to payment processing) takes place within the interface of the app store. As the AG noted, consumers perceive the store as their contractual counterparty. This perception supports the legal presumption that the store is acting in its own name, thereby reinforcing the intermediary fiction established by Article 28.
Considering the above, the AG answered that even for the period between 2012 and 2014 (prior to the entry into force of Article 9a of the implementing regulation), the app store (and not the developer) must be regarded as the supplier of the service to the purchasers of the apps. Consequently, the developer had no obligation to charge German VAT on those transactions.
Case analysis: the place of supply rules when transactions are split
The AG then turned to a second question, which concerns the place of supply rules applicable when Article 28 splits a transaction into two legs, one from the developer to the store (B2B) and from the store to the consumer (B2C).
The first leg constitutes a B2B service. According to Article 44 of the VAT Directive, the place of supply for services rendered to a taxable person is where that recipient is established (in this case, Ireland). This interpretation avoids unnecessary complications, as treating the first leg as a direct B2C transaction would require developers to identify the consumer’s location without having access to the necessary data, increasing the risk of misapplication of VAT.
As for the second leg, during the pre-2015 period it also falls under Irish VAT, since the deemed supplier is established there. From January 1 2015, the rules changed and the place of supply for digital B2C services shifted to the customer’s member state under Article 58 of the VAT Directive. However, even then, VAT liability continues to rest with the intermediary (the app store), not the developer.
The implications of the ECJ’s opinion for digital platform taxation
The AG´s opinion provides a clear interpretation by emphasising the key role of the intermediary rather than focusing on formal visibility.
If the court follows this reasoning, it will offer much-needed legal certainty for past transactions, particularly those carried out before the 2015 reforms. Digital platforms that determine the key elements of the transaction, such as pricing and payment, will bear full responsibility for complying with VAT obligations and for remitting the corresponding tax. This solution not only reflects the economic reality of how digital services are supplied but also brings consistency with the destination-based principle; under which, VAT is due in the country where the final consumer is located.
Whether acting as intermediaries or facilitators, digital platforms are becoming (and will likely remain) major VAT collectors in transactions carried out within the digital economy.
