It is likely that we will soon have the decision of the European Court of Justice (ECJ) on the Fenix case (C-695/20). The question put to the ECJ by the United Kingdom aims to determine whether the provisions of Article 9a of the VAT implementing regulation, relating to the role of digital intermediation platforms in services provided by electronic means, go beyond the scope of Article 28 of the VAT Directive.
While the question put to the CJEU seems complicated, in practice everything seems to indicate that the CJEU will rule, one way or another, when an intermediary such as a digital platform acts in its own name or on behalf of from another person.
The ECJ ruling on this issue will have an impact on the so-called sharing economy for which the industry is eagerly awaiting the ruling.
Although expectations as to the scope of this decision are wide, its impact may be limited since Article 9a of the VAT implementing regulation refers to services provided electronically (from the principal to the platform and from the latter to the client).
Therefore, in cases where the service in question is not considered to be provided electronically, which indeed happens on many occasions, the provisions of Article 9a should, in principle, not apply. It is possible that due to the degree of human intervention, services provided via digital platforms may not be considered to be provided electronically. This situation is found on a daily basis in the case of education, health and, to a lesser extent, financial services.
As a result, there may soon be a solution regarding the role of facilitating platforms in the intermediation of electronically delivered services. This will be a step forward in the taxation of the sharing economy. However, what happens when it comes to non-electronically delivered services? If we consider that the platform provides an intermediation service, does it do so in its own name or on behalf of another person?
According to Article 28 of the VAT Directive, when a taxable person acting in his own name participates in the supply of services, he is deemed to have received and provided those services himself. That is, a reputable service is produced, for which it must be considered that it receives the service of the supplier and, at the same time, provides the same service to the final consumer.
In this regard, it is important to remember that a taxable person acting in his own name refers to what is normally called an “undisclosed agent”. The term “undisclosed agent” specifically refers to the fact that the person acquiring the service is unaware of dealing with an intermediary but with the principal of the service (the end consumer who acquires the services does not know that the agent acts on a on behalf of the director).
It is questionable whether this happens in the sharing economy because, in most cases, the end consumer is aware that there is, on the one hand, a service provider (e.g. a driver who provides services). transport) and, on the other hand, there is an intermediary who puts the consumer in contact with this service provider.
In this regard, the ECJ ruled in Case C-734/19 that for the application of Article 28 of the VAT Directive, the services acquired by the commission agent should be identical to those provided to the principal.
It is again debatable whether the above occurs in many business models of the sharing economy. The services provided by the platform are in most cases much broader than the services provided by the ordering party. In these cases, the application of Article 28 of the VAT Directive could be problematic.
However, the non-application of this article in case of platform intermediation 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 a provision has been made that the facilitating platform is deemed to receive and deliver the goods sold online. It can therefore be argued that, to be consistent, the same conclusion should be drawn in the case of the provision of services. However, neither the regulations currently in force nor the case law of the ECJ seem to support this idea in a clear way.
Far from being the solution, it is foreseeable that the ECJ ruling in the Fenix case will be the starting point for new discussions on the subject since the number of business models in the sharing economy currently seems unlimited.
Managing Director, Spanish VAT Services
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