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E-commerce

By Buju, Stanciu & Asociații

CJEU upholds EU VAT provision for digital platforms

Background to the dispute

The Court of Justice of the European Union (CJEU) published its decision in the Fenix case (C-695/20) on 28 February 2023. Fenix operates an online social media platform where creators can upload content, and users can access this content by making ad-hoc payments or by paying a monthly fee. Fenix collects payments made by users and remits these payments to creators, using a third-party payment service provider. The UE VAT Implementing Regulation (together with the EU VAT Directive) contains a presumption provision for platforms facilitating digital services. Where the conditions of this provision are met, the platform operator is deemed to be acquiring the digital services from the service providers (creators) and to be reselling those services to the recipients of the services (users). Fenix challenged the validity of this provision set out in the UE VAT Implementing Regulation.

The CJEU's decision

According to the CJEU's decision, the EU VAT provision for platforms facilitating digital services is valid. The CJEU held that the platform operator cannot rebut the presumption that this provision applies where it authorises the charge to the customer, authorises the supply of the services, or sets the general terms and conditions of the supply. The CJEU emphasised that this reflects the economic and commercial reality in the context of digital services, since the platform operator can unilaterally define essential elements of these supplies, such as the provision of the service, the timing of the supply, the payment conditions and the legal framework for such services.

Practical implications and observations

The CJEU's decision in the Fenix case should only be considered in the context of digital services. Notwithstanding the CJEU's decision, platform operators must still assess whether they can rebut the presumption that this provision applies. The presumption provision for platforms facilitating certain e-commerce goods sales and the new presumption provision for platform operators facilitating short-term accommodation and passenger transport, included in the European Commission's proposal on VAT in the Digital Age (ViDA), are based on separate provisions of the EU VAT Directive.