The European Court of Justice ruled on Tuesday 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.
This article summarises the Court Judgement C-695/20 Fenix International v HMRC.
FACTS
Fenix International, a company which is registered in the United Kingdom, operates an online platform 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. Fans can access content by making payments, while also having the possibility to pay tips or donations to the creators without consideration.
The taxpayer is responsible for collecting and distributing the payments made by fans, charging creators an amount of 20% of the sums paid by their fans by way of a deduction. The taxpayer charged and accounted for vat, in respect of these payments, on a tax base constituted by the 20% deduction.
Taking the view that the taxpayer was required to pay VAT on the basis not of the 20% deduction but of all sums paid by the fans the HMRC sent Fenix VAT assessments for a period between 2017 and 2020 on the basis that Fenix had to be deemed to be acting in its own name and consequently had to pay VAT on all the sums received.
Fenix filed an appeal before a UK court challenging the validity of the legal basis for the tax assessments, namely a provision of an implementing regulation of the European Council seeking to clarify the VAT directive. The legal basis for the assessments in HMRC's view was that Fenix should be deemed to be acting in its own name by virtue of Article 9a.
Article 9a of Council Implementing Regulation
Article 9a states:
'1 For the application of Article 28 of the VAT Directive, where electronically supplied services are supplied through a telecommunications network, an interface or a portal such as a marketplace for applications, a taxable person taking part in that supply shall be presumed to be 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.'
The question is whether Article 9a is invalid on the basis that it goes beyond the implementing power or duty on the Council established by Article 397 of the VAT Directive insofar as it supplements or amends Article 28 of the VAT Directive.
Summary
In line with the opinion of Advocate General of the European Court of Justice of the European Union, the Court holds 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, that taxable person may unilaterally define essential elements relating to the supply, namely the provision of that service and the time at which it will take place, or the conditions under which the consideration will be payable, or the rules forming the general framework of that service. In such circumstances and having regard to the economic and commercial reality reflected by them, it is correct to state that the taxable person must be regarded as the supplier of services pursuant to the VAT Directive.
In conclusion, the contested provision thus respects the general aims of the VAT Directive, is necessary or appropriate for its implementation and provides further detail without supplementing or amending it.
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