ECJ backs VAT liability of online platform providers

The European Court of Justice established in its ruling of 28 February 2023 that online platform OnlyFans is liable for value added tax (VAT) on the full amount paid by subscribers to content creators, not only on the 20% fee that the platform is charging creators of the sums paid by fans. This decision supports the position of the UK tax authority (HMRC) and further emphasizes the tax obligations of online platforms, regardless of their place of establishment.

Background

Fenix International, a company which is registered in the United Kingdom, operates an online platform widely known as Only Fans that is offered to 'users' from around the world, who are divided into 'creators' and 'fans'. Creators post content such as photographs and videos to their respective profiles and can also stream live videos to their respective profiles and can also stream live videos to their fans or send private messages to them. Each creator determines the amount of the monthly subscription, although Fenix sets the minimum amount payable both for subscriptions and for tips.

Fenix provides not only the Only Fans platform but also the device enabling financial transactions to be carried out. Fenix is responsible for collecting and distributing the payments made by fans, using a third-party entity which supplies payment services. Fenix also sets the general terms and conditions for use of the Only Fans platform. Fenix levies 20% on any sum paid to a creator to whom it charges the corresponding amount. On the sum which it levies in this way, Fenix applied VAT at a rate of 20%, which appears on the invoices which it issues. All payments appear on the relevant fan’s bank statement as payments to Fenix.

Marketplace=intermediary for VAT purposes?

In accordance with Art. 9a(1) of Implementing Regulation No 282/2011, where electronically supplied services are supplied through a portal such as a marketplace for applications, a taxable person taking part in that supply shall be presumed to be an intermediary (acting in his own name but on behalf of the provider of those services, unless that provider is explicitly indicated as the supplier by that taxable person and that is reflected in the contractual arrangements between the parties).

In line with the opinion of the Advocate General of the European Court of Justice of the European Union, the Court of Justice established that, where a taxable person taking part in the supply of a service by electronic means, by operating, for example, an online social network platform, has the power to authorize the supply of that service, or to charge for it, or to lay down the general terms and conditions of such a supply, or generally the rules forming the general framework of that service, it is correct to state that the taxable person must be regarded as the supplier of services pursuant to the VAT Directive.

It is important that in the given case it was the platform provider who set the general terms of the agreements, invoiced and collected all payments from the ‘fans’. This implies that under such conditions OnlyFans is to account for VAT on the total amount charged and collected, not only on the 20% commissions.

Further context

ECJ ruled against another platform provider, Airbnb, twice recently, as well. In cases C-674/20 and C-83/21 under somewhat different scopes the ECJ found that electronic platform operators’ reporting and/or disclosure obligations are consistent with EU law, regardless of the fact whether the platform provider is registered/established in the given jurisdiction. The ECJ, however, also set limitations to the tax obligations in the latter case, stating that the requirement of a tax representative in the Member State in question might be necessary but unproportionate and thus in breach of EU law.