On 8 May 2019, the European Court of Justice gave its judgment in case C-568/17 (J.W. Geelen) regarding the place of supply for erotic webcam sessions.
Context: Reference for a preliminary ruling — Value added tax (VAT) — Sixth Directive 77/388/EEC — Article 9(2)(c) and (e) — Directive 2006/112/EC — Article 52(a) — Article 56(1)(k) — Supply of services — Place of taxable transactions — Reference for tax purposes — Live interactive erotic webcam sessions — Entertainment activity — Definition — Place where the services are physically carried out
Articles in the EU VAT Directive
Article 52(a) and 56(1)(k) of the EU VAT Directive 2006/112/EC.
Article 52(a)
‘The place of supply of the following services shall be the place where the services are physically carried out:
(a) cultural, artistic, sporting, scientific, educational, entertainment or similar activities, including the activities of the organisers of such activities and, where appropriate, ancillary services’.
Article 56(1)
‘The place of supply of the following services to customers established outside the Community, or to taxable persons established in the Community but not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment for which the service is supplied, or, in the absence of such a place, the place where he has his permanent address or usually resides:
…
(k) electronically supplied services, such as those referred to in Annex II’.
Facts (simplified):
- L.W. Geelen, is a taxable person established and registered for VAT purposes in the Netherlands. He provides services that consist of organizing and making live interactive erotic webcam sessions available.
- The models that appear in the picture during the sessions are at that moment in the Philippines. Geelen provides them with the hardware and software required for the execution of the webcam sessions.
- Customers can contact the models via the internet if they have created an account with one of the internet providers. These providers charge the buyers a fee, of which they pay a part to Geelen.
- The sessions are live and interactive in nature, which means that the customers can communicate with the models and make requests.
- The services provided by Geelen are in principle intended for the Dutch market, although technically, also users from outside the Netherlands could access the websites and create an account.
Geelen did not submit VAT returns for its activities. However, the Dutch tax authorities were of the opinion that VAT was payable on the services in the Netherlands.
Question
(a) Should the first indent of Article 9(2)(c) of the Sixth Directive … or Article 52(a) of the VAT Directive …, respectively, be interpreted as also covering the provision, in return for payment, of live interactive erotic webcam sessions? (b) If question 1(a) is answered in the affirmative, should the phrase “the place where those services are physically carried out” in Article 9(2)(c) of the Sixth Directive or “the place where the services are physically carried out” in the introductory sentence of Article 52 of the VAT Directive …, respectively, then be interpreted as meaning that the decisive factor is the place where the models perform in front of the webcamera or the place where the [customers] view the images, or could even some other place be envisaged? (2) Should the 12th indent of Article 9(2)(e) of the Sixth Directive or Article 56(1)(k) of the VAT Directive …, read in conjunction with Article 11 of [Regulation No 1777/2005], be interpreted as meaning that the provision, in return for payment, of live interactive erotic webcam sessions can be deemed to be an “electronically supplied service”? (3) If both question 1(a) and question 2 are answered in the affirmative, and the designation of the place of the service according to the relevant provisions of the directives concerned results in a different outcome, how should the place of the service then be determined?
AG Opinion
Article 9(2)(c) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 2002/38/EC of 7 May 2002, and Article 52(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in the version applicable until 31 December 2009, must be interpreted as meaning that services consisting in the organisation and provision of live interactive erotic webcam sessions do not constitute a supply of services relating to entertainment activities within the meaning of those provisions.
Decision
1) Article 9 (2) (c), first indent, of Sixth Council Directive 77/388 / EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes business – Common system of value added tax: uniform base, as amended by Council Directive 2002/38 / EC of 7 May 2002, and Article 52 (a) of Directive 2006/112 / EC of the Council of 28 November 2006 relating to the common system of value added tax, must be interpreted as meaning that a complex service, such as that at issue in the main proceedings, consisting in offering interactive sessions of a erotic filmed and broadcast live via the Internet constitutes an “entertainment activity” within the meaning of these provisions,which must be considered as being “materially executed”, within the meaning of those- here, at the place where the service provider has established the head office of his economic activities or a permanent establishment from which this provision of services is provided or, failing that, at the place of his domicile or habitual residence.
2) Article 9 (2) (e), twelfth indent, of Sixth Directive 77/388, as amended by Directive 2002/38, and Article 56 (1) (k) of the Directive 2006/112, in conjunction with Article 11 of Regulation (EC) n o 1777/2005 of the Council of 17 October 2005 laying down implementing measures for Directive 77/388 must be interpreted as precluding ” a provision of services, such as that at issue in the main proceedings, consisting in offering interactive sessions of an erotic nature filmed and broadcast live via the Internet does not fall, when that service was provided to beneficiaries all located in the State member of the provider of these services, within the scope of these provisions.
Source
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