ECJ C-101/24 ( Finanzamt Hamburg-Altona) – Questions- Applicability of VAT Regulations to Cross-Border Transactions in Mobile App Marketplaces

1. The parties are in dispute about the VAT taxation of so–called ‘in–application purchases’ effected during the years from 2012 to 2014 (the years at issue), in
   which Article 9a of Implementing Regulation No 282/2011 had not yet entered into force.
2. The applicant and defendant in the appeal (‘ the applicant’), a taxable person established in the Federal Republic of Germany, develops and distributes game
   applications for mobile devices. For distribution purposes, it uses, inter alia, an internet–based digital distribution platform for software (referred to as a ‘marketplace for applications’). The marketplace for applications was operated by Ireland–based X until 31 December 2014. During the years at issue, end  customers who used mobile devices with a specific operating system were able to download the applicant’s game applications solely via the marketplace for  applications.
3. During that period X entered into standardised agreements, governing the distribution of products via the marketplace for applications, with developers such as the applicant. Those agreements stipulated that the sellers of the products offered through the marketplace for applications were their developers. X was to display the products on behalf of the developers and make them available for the end customers to download and purchase. X was to receive a commission in  return for providing those services. The payment transaction was to be processed via the marketplace for applications.
4. During the years at issue, various downloadable game applications were available to the end customers in the marketplace for applications. The vast majority of those games did not originate from X but rather from the designers themselves. When presented in the marketplace for applications, the name of the developer was also displayed for each game. During the years at issue, the applicant appeared in the marketplace for applications and its company name, legal form and address were displayed.
5. Although the game applications developed by the applicant could be downloaded free of charge from the marketplace for applications, it was necessary for the end customer to purchase improvements or other benefits (in–application purchases) in order to advance in the game or obtain other benefits. The end customers were able to select the desired improvements or benefits in the applicant’s game application and have them activated for a fee.
6. The in–application purchases were processed via the marketplace for applications by means of a method of payment saved there by the end customer. The applicant was not named as the supplier in the course of the purchase transaction. Only X’s logo and certain links were visible. Upon completion of the purchase process, the end customer received an order confirmation from X by email. That email contained the logo of the marketplace for applications and a statement thatpurchase was transacted with the relevant developer (in this case, the applicant) in the marketplace for applications.
7. The applicant initially regarded itself as the supplier to the end customers. It therefore declared German VAT for end customers based in the European Union, on the ground that the place of supply was, pursuant to Article 3a(1) of the UStG and Article 45 of Directive 2006/112, its place of establishment, and paid the German VAT to the defendant and to the appellant in the appeal on a point of law, namely the Finanzamt (Tax Office) (‘the FA’).
8. On 29 January 2016, the applicant submitted corrected VAT returns for the years at issue. It was now of the opinion that this was a case in which services were commissioned (Paragraph 3(11) of the UStG, Article 28 of Directive 2006/112). It had provided its services to X, and X had provided the services to the end customers. Under Paragraph 3a(2) of the UStG and Article 44 of Directive 2006/112, the place of supply of its services to X was in Ireland.
9. The FA took the view that X was merely to be regarded as an intermediary. It is true that the respective purchase process took place via the marketplace for applications. However, the end customers were made aware of the terms of use at each individual step of the in–application purchase. X had thus clearly  informed the end customers in the course of each purchase that the transactions were being executed on behalf a third party and that X was merely collecting the amount owed. The FA therefore issued VAT assessments in which the corrections made by the applicant had not been not taken into account.
10. The Finanzgericht (Finance Court) (‘the FG’) upheld the action brought by the applicant. It considered that the appellant’s transactions were not taxable in Germany because the recipient of its services was X. According to Paragraph 3a(2) of the UStG and Article 44 of Directive 2006/112, the place of supply was in Ireland.
11. The FA’s appeal on a point of law (Revision) to the referring court is directed against the judgment of the Finanzgericht (Fiscal Court).

• Under circumstances such as those in the main proceedings, in which a German taxable person (developer) supplied, before 1 January 2015, a service by electronic means to non–taxable persons (end customers) established within the territory of the European Union, via a marketplace for applications operated by an Irish taxable person, is Article 28 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax to be applied, with the result that the Irish taxable person is treated as if it had received those services from the developer and supplied them to the end customers, because the marketplace for applications did not name the developer as the supplier of the service and show German VAT until it did so in the order confirmations issued to the end customers?
• If the first question referred is answered in the affirmative: Is the place of supply of the fictitious service supplied by the developer to the marketplace for applications under Article 28 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax in Ireland, by virtue of Article 44 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, or in the Federal Republic of Germany, by virtue of Article 45 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax?
• If, by virtue of the answers to the first and second questions referred for a preliminary ruling, the developer has not supplied any services in the Federal Republic of Germany: Is the developer subject to a tax liability for German VAT under Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, on the ground that the marketplace for applications, acting in accordance with an agreement, named the developer as the supplier of the service and showed German VAT in the order confirmations it sent by email to the end customers, even though the end customers are not entitled to deduct input VAT
  

Summary

• Join the Linkedin Group on ECJ VAT Cases, clickHERE
• VATupdate.com – Your FREE source of information on ECJ VAT Cases