Applications, audiovisual content, video games, and subscriptions are now routinely purchased through digital platforms. For VAT purposes, this raises a question of considerable practical importance, which is if the platform merely acts as an intermediary or is it the platform itself that supplies the service to the consumer. The answer determines whether VAT applies only to the platform’s commission or to the full price paid by the customer.
When the platform acts in the name of another person, the underlying provider supplies the service directly to the customer. The platform makes a separate supply of intermediation services, and the taxable amount is limited to its commission. Conversely, when the platform acts in its own name but on behalf of another person, Article 28 of the EU VAT Directive applies. The platform is then deemed to have received and supplied the service itself and must therefore charge VAT on the full price.
Article 28 and the commissionaire fiction
The above commissionaire fiction gives rise to two successive supplies. The provider supplies the service to the platform, which in turn supplies it to the final customer. Its rationale is essentially practical. The provider often does not know the customer and cannot invoice them, so it invoices the platform, which documents the transaction and accounts for the tax. The result is a coherent chain of invoicing, collection, and deduction.
It should be stressed that the identity of the two supplies is the consequence of Article 28, not a description of reality. The Court of Justice of the European Union (CJEU) has consistently affirmed this identity since Henfling (C-464/10). Clearly, the platform does not consume the service only to supply it again. This is, therefore, a fiction for VAT purposes that does not reflect any commercial or economic reality. Within this fiction of a double supply of services, material continuity is required. The customer must receive a service that remains identifiable as the one supplied by the provider. The functions added by the platform (the interface, payment collection, terms of use, and customer support) do not turn it into a different service; rather, they explain why the platform is involved. Indeed, if the platform added no value, its intermediation would make no sense at all. The identity of the services must therefore be understood as relative.
Platform control and recent CJEU guidance
When does a platform act in its own name? Contracts are the starting point, but they might not be conclusive. The economic and commercial reality is important as well:
How the service is presented;
Who sets the general terms and conditions;
Who authorises the charge;
Who controls access;
Who handles complaints and refunds; and
With whom the customer actually deals.
The decisive question is whether the platform behaves towards the customer as the supplier of the service.
Traditionally, acting in one’s own name was associated with undisclosed agency, where the customer is unaware of the principal. That association is no longer decisive. In Xyrality (C-101/24), the CJEU held that the mere fact that the customer learns the identity of the principal through order confirmations received after the purchase does not preclude the application of Article 28 where the other relevant factors are present. Disclosing who supplies the service is not the same as acting in that person’s name.
For electronically supplied services, the EU legislator has gone further. Article 9a of Implementing Regulation 282/2011 presumes that a platform taking part in the supply acts in its own name. This presumption can be rebutted only if the platform explicitly identifies the provider as the supplier, that identification is reflected in the contractual arrangements, and the provider is shown on the invoices or receipts issued to the customer. Moreover, the presumption cannot be rebutted where the platform authorises the charge to the customer, authorises the delivery of the service, or sets the general terms and conditions.
The Fenix International judgment (C-695/20) confirmed the validity of this provision. The CJEU did not rule on the role of platforms. Instead, it considered whether Article 9a exceeded the implementing powers by creating new requirements not provided for in the VAT Directive, and concluded that it did not. Article 397 of the directive empowers the Council to ensure the uniform application of Article 28.
The consequences are clear. A platform that takes part in electronically supplied services and manages the payment or sets the terms and conditions (an entirely common practice) is, for VAT purposes, the supplier of the service, with no possibility of proving otherwise. For other services, whether electronic or not, it will be the supplier when it acts in its own name and has not explicitly identified another person as the supplier.
Looking ahead
The debate has shifted away from form and now focuses on how control is exercised. It should not be forgotten that the ViDA reform extends the liability of platforms. It does so through a specific provision covering short-term accommodation rental and passenger transport by road, but the effect is, in essence, very similar.
Under ViDA, it is sufficient to facilitate the services identified by the legislation. Under Article 28, it is sufficient to intermediate on behalf of another person while exercising certain controls over the transaction without identifying the underlying provider. In both cases, the platform is liable for the VAT. This will undoubtedly set the tone for how platforms will transform the VAT system.
