The contribution comments on the world's digital transformation, the challenges involved in identifying the business liable for the VAT where digital services are delivered through (multiple) intermediaries, the different business scenarios and their VAT implications and the EU VAT Directive and implementing provisions.

1. EUCOTAX Series on European Taxation
VAT/GST in a Global Digital Economy
Edited by
Michael Lang
Ine Lejeune

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3. Editors
Prof. Dr. Dr. h.c. Michael Lang is Head of the Institute for Austrian and International
Tax Law of WU (Vienna University of Economics and Business) and Academic Director
of both the LLM Program in International Tax Law and of the Doctoral Program in
International Business Taxation (DIBT) of this university. He is President of the
Austrian Branch of the International Fiscal Association (IFA). He has been a visiting
professor at Georgetown University, New York University, Sorbonne University,
Bocconi University, Peking University (PKU), University of New South Wales (Sydney)
and at other universities.
Ine Lejeune is an attorney at law and partner, leading the Tax Policy, Dispute
Resolution and Litigation practice at Law Square, a Brussels-based law firm. Before
joining Law Square, she held multiple leadership positions at PwC, including global
indirect taxes leader, partner in charge for services to the EU institutions and global
indirect taxes policy leader. She has delivered policy services, as well as advised and
been involved in litigation (e.g., the ARO Lease case). She has been a member of the
European Commission’s VAT Expert Group since 2012 and has lectured since 2010 at
the Vienna University of Economics and Business (WU) in the LL.M. International Tax
Law programme and as guest professor at other universities. In addition to having
published extensively, she was Belgian Taxman 2009, was elected 5th Global Most
Influential Tax Expert by Tax Business in 2006 and 1st Indirect Tax Expert.
v

5. Contributors
Francesco Cannas. After having worked for almost ten years as a civil servant in the
Italian public administration, Francesco switched his career to taxation. He obtained a
Masters Degree in Corporate Tax Law from Bocconi University (Milan) and an LL.M. in
International Taxation from the Vienna University of Economics and Business (WU).
Currently, he is Trainee Lawyer and will be soon eligible for training as a Chartered
Accountant. At the beginning of 2014, he was appointed as an external lecturer
(Cultore della Materia) at the University of Torino. Since September 2014, he has been
studying for his doctorate degree in the Doctoral Program in International Business
Taxation (DIBT) at the WU.
Sophie Claessens is a Senior Manager, Indirect Tax, PwC Belgium, and is based in
Antwerp, Belgium. A specialist in VAT for fourteen years with a particular focus on
business-to-consumer industries, including telecommunications, media, internet and
e-commerce. She supports major industry players on sector-specific issues, including
VAT compliance at both an operations and strategic level, and is directly involved in
policy work for businesses in these industries, both at the Belgian level and at the level
of the European Commission. She is responsible for indirect taxes in the communica-
tions sector at PwC Belgium and is a driver of PwC’s Business Working Group on the
EU 2015 VAT changes. She has authored articles for publication in Belgian and
international tax journals.
Tom Corbett is a partner in PwC’s tax services practice, specializing in VAT and
customs and international trade. He advises companies within the technology sector on
Irish and global VAT matters, with a particular focus on US-headquartered multina-
tionals investing in Europe. His clients include a number of household names in the
technology sector, primarily from the US West Coast, but also including the indigenous
sector. He has been at the forefront of contributing to and advising on the 2015 changes
affecting Irish and global companies.
Before joining PwC, Tom worked for the Revenue Commissioners, consulting
and also practising as a Barrister before the Irish courts. He is a Barrister at Law and an
Associate of the Irish Taxation Institute
vii

6. MMag. Dr Thomas Ecker is the Deputy Head of the VAT Unit in the Austrian Federal
Ministry of Finance. Before this, he worked as research associate at the Institute for
Austrian and International Taxation at the WU, where he still lectures. He is a delegate
to various EU and OECD bodies. His thesis, ‘A VAT/GST Model Convention’, was
awarded the IFA Maurice Lauré Prize in 2012.
Walter Hellerstein is Distinguished Research Professor and Shackelford Professor of
Taxation at the University of Georgia School of Law, Athens, Georgia, United States. He
is co-author of State Taxation, vols I & II (3rd ed., updated tri-annually); State and Local
Taxation (10th ed., 2014); and Taxing Global Digital Commerce (2013), as well as more
than 100 journal articles. He serves as an academic advisor to the OECD’s Working
Party No. 9 on Consumption Taxes and is a member of the Working Party’s Technical
Advisory Group on VAT/GST Guidelines.
Associate Professor Oskar Henkow is a teacher and researcher in indirect taxation
and EU law at the School of Economics and Management, Lund University, Sweden. He
has published extensively on European VAT, as well as comparative VAT/GST issues.
He is editor in charge of the case law and legislative development sections of the World
Journal of VAT/GST Law. He is also part-time partner at EY Sweden, and responsible
for indirect tax training at EY in the EMEIA area (Europe, Middle-East, India and
Africa).
Marie Lamensch obtained her Doctorate at the Vrije Universiteit Brussel (VUB) in July
2014. She teaches VAT law at the Catholic University of Louvain (UCLouvain) and
International and European Law at the VUB where she also works as Senior Research
Fellow. She participates in the OECD WP9 Technical Advisory Group on Consumption
Taxes and guest lectures at IBFD’s International Tax Academy. She previously acted as
researcher for the G20 task force on the Financial Transactions Tax, practiced as a
lawyer in Brussels and Luxembourg, and worked as teaching assistant in contract law
at the Université Libre de Bruxelles (ULB). She holds a Law Degree from the ULB and
an LLM degree in international and European Law from the VUB.
Costantino Lanza works in the field of VAT administrative cooperation at the
European Commission, DG taxation and customs union (TAXUD), where he has been
since 2007. He graduated in Law, Political sciences, and sciences of financial and
economic security. He has previously worked as an official of Guardia di Finanza, the
Italian economic and financial police.
Rebecca Millar is a Professor of Law at the University of Sydney Law School. She
specializes in Australian GST and comparative VAT and has published widely on both
topics, including as co-author of Taxing Global Digital Commerce (2013). She is on the
editorial board of the World Journal of VAT/GST Law, and is a pro bono academic
advisor to the secretariat of OECD Working Party 9 on Consumption Taxes and a
member of the Working Party’s Technical Advisory Group on International VAT/GST
Guidelines. She has also served as a member of the Australian Taxation Office rulings
Contributors
viii

7. panels and as an expert advisor to the Australian Board of Taxation and Treasury. From
2005 to 2012, she assisted in the design and drafting of indirect tax laws through the
IMF and World Bank technical assistance programs. Prior to 2002, she was a tax
practitioner.
Duy Nguyen works at EY Amsterdam and has in-depth VAT technical knowledge on,
and practical experience in advising companies with global operations in the digital
economy and telecommunications sector. In recent years, he has focused on advising
multinational e-services and telecommunications companies on the implementation of
the EU VAT 2015 changes. A global top-3 online gaming company has engaged him to
advise on their global VAT position, including the implementation of VAT 2015 in the
EU. In addition, a key player in the global telecommunications sector has requested
that he provide overall EU policy advice as regards VAT 2015 and the provision of
digital content, which policy will be implemented by each local subsidiary. He serves
as the key knowledge source on digital economy VAT matters within EY Netherlands
and has spoken regularly at seminars and webinars on this topic.
Christophe Waerzeggers is a Senior Counsel in the Legal Department of the Interna-
tional Monetary Fund. In that capacity he has provided advice on tax law reform to
countries in Asia, Europe, Africa, the Middle East, the Caribbean and the Pacific. Prior
to joining the Fund he worked in academia in The Netherlands (Utrecht University) and
in private practice in Brussels, Belgium (first with De Bandt, van Hecke & Lagae and
later with Hogan & Hartson). He is a co-author of Taxing Global Digital Commerce
(2013) and has published a number of articles on VAT and customs law. The views
expressed in this paper are those of the author. They do not necessarily represent IMF
views or IMF policy and should be attributed to the author, not to the IMF, its Executive
Board or its management.
Dr Björn Westberg is Professor in Tax Law at the Jönköping International Business
School in Sweden. He is a Doctor of Law, LL.M. and Master of Business Administration.
In addition to his academic career, he has experience in leadership positions in the
business community and as a judge on an Administrative and Tax Court of Appeals. In
2013, the European Commission appointed him as a Member of the High-Level Expert
Group on Taxation of the Digital Economy.
Contributors
ix

9. Summary of Contents
Editors v
Contributors vii
Preface xxi
List of Figures and Table xxiii
CHAPTER 1
The New Models of the Digital Economy and New Challenges for
VAT Systems
Francesco Cannas 1
CHAPTER 2A
The Treatment of ‘Digital Products’ and Other ‘E-Services’ under VAT
Marie Lamensch 15
CHAPTER 2B
Comments on Chapter 2: View of the Court of Justice on Rates and
Neutrality: Ruling in K Oy
Ine Lejeune 41
CHAPTER 3
VAT and Virtual Reality: How Should Cryptocurrencies Be Treated for VAT
Purposes?
Oskar Henkow 45
CHAPTER 4A
Intermediated Delivery and Third-Party Billing: Implications for the
Operation of VAT Systems around the World
Sophie Claessens & Tom Corbett 59
xi

10. CHAPTER 4B
Comments on the Discussion of Article 9a of Implementing Regulation
1042/2013
Duy Nguyen 79
CHAPTER 5
Exploring the Potential Linkages Between Income Taxes and VAT
in a Digital Global Economy
Walter Hellerstein 83
CHAPTER 6
VAT Collection and Compliance in the Digital Economy: Challenges and
Opportunities
Christophe Waerzeggers 119
CHAPTER 7A
Digital Economy International Administrative Cooperation and Exchange
of Information in the Area of VAT
Thomas Ecker 141
CHAPTER 7B
International Administrative Cooperation and Exchange of Information in
the Area of VAT
Björn Westberg 161
CHAPTER 7C
Digital Economy: International Administrative Cooperation and Exchange
of Information in the Area of VAT – EU Perspective
Costantino Lanza 169
CHAPTER 8
Looking Ahead: Potential Solutions and the Framework to Make Them
Work
Rebecca Millar 173
CHAPTER 9
Conclusions: The Future of VAT in a Digital Global Economy – Innovation
versus Taxation
Ine Lejeune & Sophie Claessens 197
Index 219
Summary of Contents
xii

11. Table of Contents
Editors v
Contributors vii
Preface xxi
List of Figures and Table xxiii
CHAPTER 1
The New Models of the Digital Economy and New Challenges for
VAT Systems
Francesco Cannas 1
§1.01 Introduction 1
§1.02 Background and Most Recent Developments 2
[A] The Ottawa Conference 2
[B] The E-Commerce Guidelines 3
[C] The Consumption Tax Papers 3
[D] Recent Developments 4
[1] The BEPS Project 4
[2] The EU Report on Taxation of the Digital Economy 5
§1.03 New Business Models and VAT-Related Problems 6
[A] Context 6
[B] E-Commerce Models 6
[1] Business-to-Business 6
[2] Business-to-Consumer 7
[3] Consumer-to-Consumer 8
[C] Payment Services and Virtual Currencies 9
[D] Digital Goods and Digital Services 10
§1.04 A Case Study: Newspaper Subscriptions 11
[A] Introduction and Facts 11
xiii

12. [B] The EU 11
[C] New Zealand 12
[D] Australia 13
§1.05 Conclusion 13
CHAPTER 2A
The Treatment of ‘Digital Products’ and Other ‘E-Services’ under VAT
Marie Lamensch 15
§2A.01 Introduction 15
§2A.02 Characterizing and Defining Digital Products and E-Services 15
§2A.03 Place of Taxation and Assessment Rules for Digital Products and
E-Services 18
§2A.04 Applying Reduced VAT Rates to E-Supplies: The Case of Books
Versus E-Books 27
§2A.05 Conclusion 38
CHAPTER 2B
Comments on Chapter 2: View of the Court of Justice on Rates and
Neutrality: Ruling in K Oy
Ine Lejeune 41
CHAPTER 3
VAT and Virtual Reality: How Should Cryptocurrencies Be Treated for
VAT Purposes?
Oskar Henkow 45
§3.01 Introduction 45
§3.02 The Virtual Reality and VAT 46
§3.03 Treatment of Money, Debts and Vouchers under EU VAT 50
§3.04 Virtual Currencies and Their VAT Treatment 55
CHAPTER 4A
Intermediated Delivery and Third-Party Billing: Implications for the
Operation of VAT Systems around the World
Sophie Claessens & Tom Corbett 59
§4A.01 Introduction 59
[A] The World’s Digital Transformation 59
§4A.02 Challenges Involved in Identifying the Business Liable for the
VAT where Digital Services Are Delivered through Intermediaries 61
[A] Are Sales to, or through, the Intermediary? 61
[B] Why Is It Important? 63
§4A.03 Different Business Scenarios and Their VAT Applications 64
[A] One Digital Content Service, Multiple Intermediaries 64
[1] Intermediated Delivery: Above-the-VAT-Line Billing 65
Table of Contents
xiv

13. [2] Intermediated Delivery: Below-the-VAT-Line Billing 67
§4A.04 EU VAT Directive Provisions and Implementing Provisions 70
[A] When Does Article 9a Apply? 71
[B] Taking Part in the Supply versus Carrying Content and/or
Processing Payments 73
[C] Conditions for Rebuttal of the Presumption 75
§4A.05 Conclusion 77
CHAPTER 4B
Comments on the Discussion of Article 9a of Implementing Regulation
1042/2013
Duy Nguyen 79
§4B.01 Introduction 79
§4B.02 The Rebuttal Game: Too Many Captains? 79
§4B.03 Payment Processors Exemption 80
§4B.04 Financial Service Exemption as a Consequence? 81
CHAPTER 5
Exploring the Potential Linkages Between Income Taxes and VAT
in a Digital Global Economy
Walter Hellerstein 83
§5.01 Introduction 83
§5.02 Jurisdiction to Tax in the Digital Global Economy: Linkages between
Income Taxes and VAT 84
[A] Jurisdiction to Tax: Substantive Jurisdiction and Enforcement
Jurisdiction 85
[1] Substantive Jurisdiction and Enforcement Jurisdiction 85
[2] The Relationship between Substantive Jurisdiction
and Enforcement Jurisdiction 86
[B] Substantive and Enforcement Jurisdiction for Income Taxes and
VAT in the Digital Global Economy 88
[1] Substantive Jurisdiction for Income Taxes and VAT
Based on Digital Activity 88
[a] Substantive Jurisdiction to Tax Income Based
on Digital Activity 88
[b] Substantive Jurisdiction for VAT Based on Digital
Activity 92
[2] Enforcement Jurisdiction for Income Taxes and VAT
Based on Digital Activity 93
[a] The VAT Reverse Charge Mechanism and B2B
Digital Supplies 94
[b] Virtual Presence as a Creating Enforcement
Jurisdiction for Income and VAT Purposes 94
Table of Contents
xv

14. §5.03 Delineating the Tax Base in the Digital Global Economy: Linkages
between Income Taxes and VAT 101
[A] The Fundamental Linkage between Income Tax and
Consumption Tax Bases 101
[B] Attribution of the Tax Base: Commonly Controlled and
Multiple Location Entities 102
[1] Commonly Controlled Entities 102
[2] Legal Entities with Multiple Locations 104
[a] The Income Tax Rules 105
[b] The VAT Rules and the OECD VAT/GST
Guidelines 106
[c] Linkages 109
§5.04 Concluding Observations regarding the Linkages between Income
Taxes and VAT in the Digital Global Economy 116
CHAPTER 6
VAT Collection and Compliance in the Digital Economy: Challenges and
Opportunities
Christophe Waerzeggers 119
§6.01 Introduction 119
§6.02 Thoughts on the VAT Collection Mechanism 120
§6.03 The Digital Economy: Anything New? 124
§6.04 Collecting VAT in the Digital Economy: Things That Don’t Work
That Well 127
[A] VAT Self-Assessment by Final Consumers 127
[B] Low-Value Goods Relief and VAT Collection by Customs 129
[C] Disproportionate Compliance Burdens on Non-resident Sellers 131
§6.05 Collecting VAT in the Digital Economy: Things That Might Work
Better 131
[A] Relying on Indirect VAT Collection, but with Appropriate
Simplification and Modification 132
[1] Simplified Supplier Registration 132
[2] Dealing with Intermediaries in the Digital Supply
Chain 135
[B] Simplified Supplier Registration May Also Be a Useful
Alternative to Low-Value Goods Relief 137
[C] Administrative Cooperation 138
CHAPTER 7A
Digital Economy International Administrative Cooperation and Exchange of
Information in the Area of VAT
Thomas Ecker 141
§7A.01 Growing Need for Dispute Prevention and Resolution in the Area of
VAT 141
Table of Contents
xvi

15. §7A.02 Existing VAT Dispute Resolution Mechanisms 143
[A] Courts as Binding Dispute Resolution Mechanism 143
[1] National Courts 143
[2] Supranational or International Courts 144
[B] VAT Dispute Resolution and Prevention in the EU 145
[1] The ECJ 145
[2] VAT Committee 146
[3] Opinions of the European Commission 146
[4] VAT Cross-Border Rulings Test Case 147
[5] Other Measures 147
[C] Income Tax Dispute Resolution Mechanisms and Their
Applicability to VAT 148
[D] OECD International VAT/GST Guidelines, Working Party
No. 9 and Global Forum 151
[E] Other Examples of Dispute Resolution Fora 154
[F] Interim Conclusion 155
§7A.03 Dispute Prevention Mechanisms 156
[A] OECD Guidelines 156
[B] Advance Agreements 156
[C] Cooperative Compliance 157
[D] Good Law and Helpful and Easily Accessible Information
Provided by the Tax Administration 157
[E] Exchange of Information 157
§7A.04 The Future: Binding Dispute Resolution Mechanisms Based on
Treaties? 158
[A] Disputes about the Facts of a Case 158
[B] Disputes about Legal Interpretation 159
[C] VAT Treaty as a Solution? 159
§7A.05 Conclusion 160
CHAPTER 7B
International Administrative Cooperation and Exchange of Information
in the Area of VAT
Björn Westberg 161
§7B.01 Key Points 161
§7B.02 The Digital Economy 161
§7B.03 The OECD Perspective 162
§7B.04 The EU Perspective 163
§7B.05 Principles of Neutrality 163
§7B.06 Substantive Jurisdiction 163
[A] Prerequisites for Efficient and Effective Enforcement 163
[B] B2B 164
[1] Application of Reverse Charge 164
[2] Consequences for Enforcement 164
Table of Contents
xvii

16. [C] B2C 165
[1] Application of the One-Stop-Shop Mechanism 165
[2] Consequences for Enforcement 166
[D] Different Treatment of the Substantive Jurisdiction 166
§7B.07 VAT Rates 166
§7B.08 Consequences for Enforcement 167
CHAPTER 7C
Digital Economy: International Administrative Cooperation and Exchange
of Information in the Area of VAT – EU Perspective
Costantino Lanza 169
§7C.01 VAT and Digital Economy in the EU 169
[A] Electronic Commerce, Compliance and Mutual Assistance in the
EU 169
[B] Challenges for Tax Administrations 171
[C] Conclusion 172
CHAPTER 8
Looking Ahead: Potential Solutions and the Framework to Make Them
Work
Rebecca Millar 173
§8.01 Introduction 173
§8.02 Does Anything Need to Be Done? 174
§8.03 Who Should Be Doing It? 185
§8.04 How Should It Be Done? 190
§8.05 A Few Suggestions on What Should Be Done 194
CHAPTER 9
Conclusions: The Future of VAT in a Digital Global Economy – Innovation
versus Taxation
Ine Lejeune & Sophie Claessens 197
§9.01 Introduction 197
[A] The Economy Is Becoming Digital 197
[B] Is the Current Tax Framework Fit for the Digital Environment? 199
§9.02 The Place of Taxation 201
[A] Direct Tax Concepts 201
[B] VAT Concepts for E-Commerce in the EU 202
[1] Place of Taxation of Digital Supplies for Consumption 203
[2] Intermediaries 205
[3] Role of the Permanent Establishment Concept 205
§9.03 The Specific Case of Bitcoins and Vouchers 206
[A] Electronic Money 206
[B] Vouchers 207
Table of Contents
xviii

17. CHAPTER 4A
Intermediated Delivery and Third-Party
Billing: Implications for the Operation of
VAT Systems around the World
Sophie Claessens & Tom Corbett
§4A.01 INTRODUCTION
[A] The World’s Digital Transformation
The Internet of Things has been, and continues to be, changing the world in a rapid
pace and is revolutionizing the way people work, live, play and learn.
The number of connected devices is increasing dramatically. By 2020, it is
expected that there will be 25 billion Internet-connected devices in use – nearly seven
times the estimated world population,1
many of them ready to consume electronic
content.
1. Cisco Internet Business Solutions Group, 2013.
59

18. Figure 4.1 Evolution of the Number of Connected Devices by 2020
The growth of digital and mobile technologies has fundamentally changed the DNA of
the customer. Demographic change will see digital natives become the norm over the
next decade.2
The digital generation is growing up, making digital consumption the
new norm.
Figure 4.2 Digital Transformation and Demographic Shift in Customer DNA
2. PwC, Profitable Growth in the Digital Age: Unleash Your Potential (2013), available at http://
digital.pwc.com.
Connected devices
per person
World population
Connected devices
1 2 3
25bn
50bn 7 times
By 2020 there will
be nearly
more networked
devices than people
in the world
12.5bn
6.3bn
500m
6.8bn 7.2bn 7.6bn
7
2003 2010 2015 2020
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
10
20
30
40
50
60
70
80
90
100
Digital convertsTraditional Consumers
%UKActiveAdultpopualtion
Digital natives
Sophie Claessens & Tom Corbett§4A.01[A]
60

19. Increasingly, consumers are looking for content on-demand and in a digital format and
with the ability to share it through social media. These new forms of demand involve
remote consumption and use of content often stored in ‘the cloud’.3
As consumers worldwide shift their media consumption from the tangible to the
digital world, taking their information, newspapers, books, movies, music and games
with them on their mobile devices, they shake up the operation of VAT systems all over
the world – particularly when it comes to identifying who is liable for VAT in the digital
content distribution chain.
This chapter will address those supply chain issues and challenges involved in
identifying the business liable for the VAT where digital services are delivered to end
users through intermediaries4
(section §4a.02), the different business scenarios and
their VAT implications (section §4a.03) and the operation of the EU VAT Directive
provisions and regulations5
(section §4a.04).
§4A.02 CHALLENGES INVOLVED IN IDENTIFYING THE BUSINESS
LIABLE FOR THE VAT WHERE DIGITAL SERVICES ARE
DELIVERED THROUGH INTERMEDIARIES
[A] Are Sales to, or through, the Intermediary?
Where digital content6
is supplied to end users,7
it is the supplier of the services that is
liable to pay the VAT to the tax authorities.
Until the end of 2014, an EU business supplying digital content to consumers in
the EU had to charge VAT in the EU country where the supplier had established his
business, no matter where the customer belongs.8
A non-EU based business supplying
digital content to a consumer in the EU, had to charge VAT in the EU country where the
customer belongs (is registered, has their permanent address or usually lives).9
3. A method of computing whereby shared resources, software and information are provided to
computers and other devices over the Internet. National Institute of Standards and Technology,
The NIST Definition of Cloud Computing, retrieved from NIST Special Publication 800-145,
September 2011.
4. These supply chain issues exist today, but will become even more challenging in a post-EU 2015
VAT change environment where the supplier will become liable for VAT in the EU Member States
where their customers are resident or belong.
5. Current and as applicable as from 1 January 2015.
6. The term ‘digital content’ refers to electronic services, i.e., services which are delivered over the
Internet or an electronic network and the nature of which renders their supply essentially
automated and involving minimal human intervention, and impossible to ensure in the absence
of information technology.
7. The term ‘end users’ covers both private consumers and business consumers of digital content.
The focus of this chapter, however, is on private consumers.
8. Article 45 EU VAT Directive (as applicable before 1 January 2015.
9. Article 58 EU VAT Directive (as applicable before 1 January 2015). In some cases, subject to a ‘use
and enjoyment’ override.
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.02[A]
61

20. Effective from 2015, both EU and non-EU based suppliers must charge VAT in the EU
country where the customer belongs.10
For the proper functioning of the VAT system – both before and after the EU 2015
VAT changes, it is therefore necessary to agree on who the actual supplier is.
Answering this seemingly basic question appears challenging in practice, in particular
when it comes to digital services that are not supplied directly to the end users, but
rather via intermediaries.
The distribution chains for digital services, from the content creator to the end
consumer, can be very complex, for several reasons.
First, the delivery models for digital content can vary greatly and overlap. They
may involve selling through one or more intermediaries; selling directly to end users;
or a combination of the two.
Second, the supply chain may involve several parties, performing different roles
and holding different legal responsibilities. Think for example of app marketplaces,11
communications service providers,12
online aggregators13
and payment facilitators,14
as compared to the content owner15
itself.
Third, the cash flows do not always coincide with the way the services are
delivered. Sometimes, the digital content is made available through the use of premium
rate numbers – telephone numbers or SMS short codes – through which certain
services are provided, and for which a higher price than normal is charged. The
surcharge covers payment for the digital content. In other cases, the end users will have
an account at an app marketplace where they can access the content through different
Internet-connected devices and pay for the services through a credit card, their telecom
bill or another payment method.
Finally, the delivery models for digital content are often long, crossing national,
EU and non-EU, boundaries.
10. New Article 58 of the EU VAT Directive, as applicable from 1 January 2015. In some cases,
subject to a ‘use and enjoyment’ override.
11. An app marketplace (or app store) is a type of digital distribution platform for mobile apps. App
marketplaces typically take the form of an online store, where users can browse through
different app categories, view information about each app (such as reviews or ratings) and
acquire the app (including in-app purchases, if necessary; many apps are offered at no cost). The
selected app is offered as an automatic download, after which the app installs. Some well-known
examples include iOS App Store, Google Play, Amazon Appstore, Blackberry World, Samsung
Galaxy Apps and Windows Store.
12. ‘Communications service providers’ provide access to networks that can be used to transfer
voice and data. They include fixed line and mobile wireless telecommunication networks, cable
networks, Internet service provider (ISP) networks and – by extension – any network enabling
access to electronic services.
13. ‘Aggregators’ are businesses that aggregate content from multiple online sources to sell it on to
others.
14. ‘Payment facilitators’ are businesses that handle payment transactions and do the final
settlement.
15. The concept of ‘content owners’ covers the business that has created the digital content or owns
the content rights (electronic publishers). They are often also referred to as content providers.
Content providers focus on the content of the services, whereas access providers and other
service providers focus on the provision of access to the Internet or an electronic network.
Sophie Claessens & Tom Corbett§4A.02[A]
62

21. The figure below illustrates some typical examples of how content is being
delivered to the final consumer.16
Figure 4.3 Parties Involved in the Delivery of Digital Content Services17
[B] Why Is It Important?
In cases where the original content creators lose track of their own products, it can
prove to be particularly difficult for a remote app developer or content creator to know
when the content is ultimately supplied to the end user, and whether the content
creator is responsible for the collection of VAT on that supply, with all the compliance
burdens that come with this VAT responsibility. However, this hidden VAT exposure
can equally be a significant headache for the onward resellers of digital content. With
16. In practice, other parties or denominations can be involved.
17. European Commission, ‘Explanatory Notes on the EU VAT changes to the place of supply of
telecommunications, broadcasting and electronic services that enter into force in 2015’, DG
TAXUD (3 April 2014).
Content
owner
Content
owner
App
Store
Content
owner
Content
owner
Content
owner
Content
owner
Content
owner
Portal
Consumer
Aggregator
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.02[B]
63

22. EU standard VAT rates ranging from 15% (in Luxembourg) up to 27% (in Hungary),18
uncollected VAT exposure can evaporate margins and drain a profitable business.
Where multiple intermediaries are involved in delivering digital content, there is
also a higher risk of double taxation or non-taxation. This is even more the case if the
intermediaries are located in different EU countries or where non-EU based businesses
are involved. This leads to unfair competition between market players and hinders the
further development of the digital services market. Consequently, EU and non-EU
businesses that sell or distribute electronic content in the European consumer market
need a clear understanding of the different business scenarios and their VAT compli-
ance implications, in search for a strategy to best structure their EU digital supply
chains.
§4A.03 DIFFERENT BUSINESS SCENARIOS AND THEIR VAT
APPLICATIONS
[A] One Digital Content Service, Multiple Intermediaries
Currently, purchases of digital content by final consumers (business-to-consumer,
B2C) often involve a number of intermediaries, such as telecom network providers,
online aggregators, app marketplaces and/or payment facilitators, as compared to the
content creator itself.
Consider the following example involving an online gaming combined offering
scheme.
A private consumer downloads a game on a mobile device via an app market-
place, and is required to purchase additional credits worth EUR 5 to continue game
play. The terms and conditions of the marketplace make it clear that the consumer
contracts directly with the content provider or game developer. The private consumer
decides to use a payment facilitator to pay through the consumer’s mobile phone. At
the end of the month, the consumer’s mobile carrier will charge the person EUR 5 on
his phone bill.
The mobile carrier takes EUR 0.75 for his delivery service. The app marketplace
takes 0.75 EUR for making available its online platform. The payment facilitator takes
EUR 0.25. As a result, the game developer’s cut per sale will be EUR 3.25.
A typical mobile payment facilitation process can be illustrated as follows.19
18. With the range being even larger where reduced rates apply. For example France and
Luxembourg apply reduced – and even super-reduced – VAT rates to online books and other
publications.
19. However, other schemes and combinations can apply.
Sophie Claessens & Tom Corbett§4A.03[A]
64

23. Figure 4.4 Mobile Payment Facilitation Process19
The variety of interpretations between EU countries as to how to determine the VAT
liability in combined offering schemes (as illustrated above) can lead to uncertain
positions for the tax authorities and the businesses involved as regards the correct
application and collection of VAT. For the VAT liability determination with respect to
intermediated delivery of electronic services, one must return to the basic principles
and apply a VAT system that takes into account the underlying economic, commercial
and legal relationships that exist between the various parties in the supply chain.
It is therefore essential to determine the legal capacity of the intermediaries in the
content supply chain, i.e., principals acting in their own name and on their own behalf
versus undisclosed agents acting in their own name but on behalf of another party,
versus disclosed agents acting in the name and for the account of a third-party.
The legal capacity of the intermediaries should be reflected in the contractual
arrangements and general sales terms, and the invoicing scheme should be in
accordance, as well, i.e., an invoicing scheme with VAT accounting where the
intermediaries are acting as principals or as undisclosed agents (which is called
above-the-VAT-line billing) versus an invoicing scheme without VAT accounting
where the intermediaries are acting as disclosed agents (which is called below-the-
VAT-line billing).
The discussion below will consider both VAT invoicing schemes; their key
features and VAT implications; and related items requiring special attention.
[1] Intermediated Delivery: Above-the-VAT-Line Billing
Take the example of a private person wishing to download a ringtone by using a
premium rate number. The access operator can act as a content provider – in its own
name and behalf – or as an undisclosed agent (commissionaire) – in its own name but
on behalf of the content provider or another intermediary.
20. The solid (red) arrow indicates the flow of services between the content owner (here: game
developer) and the private consumer. The dotted (green) arrows indicate the money flows in the
payment facilitation process. To simplify, all amounts are inclusive of any applicable VAT.
Mobile
operator
(€0.75)
App store
(€0.75)
Payment
facilitator
(€0.25)
Game
developer
(€3.25)
Private
Consumer
€5
€3.25€3.50€4.25
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.03[A]
65

24. The financial flows, the relationships between the parties and the invoicing
process in both scenarios (which is referred to as above-the-VAT-line billing) can be
illustrated as follows.21
Figure 4.5 Access Operator Acts as Content Provider (Operator-Branded Content)22
Figure 4.6 Access Operator Acts as Commissionaire/Undisclosed Agent (Third-Party
Content)
Under an above-the-line VAT scheme – and although the access operator is not
necessarily the content owner and may even not hold any of the content rights, for VAT
purposes, the access operator provides (or is deemed to provide) the digital content
services to the end user.
The telecom cost or other service cost that is included in the content price charged
to the end user should be regarded as incidental to the content supply, in the sense that
it is only a means used by the access operator to deliver the main supply.
The key features of an above-the-VAT-line invoicing scheme are the following:
– the access operator is responsible for the correct VAT calculation and collec-
tion from the end users, and for the payment of collected VAT to the tax
authorities;
21. This is the term used where the intervening operators in the supply chain charge VAT in each
step of the sales process, even if the content originates from a third-party content provider.
22. The solid arrows indicate the flow of services between the content provider, the access operator
and the caller/end user of the content. The dotted arrows indicate the money flow. The dashed
arrows indicate the billing flow.
€1(1)
€1(2)
(1)
Price inclusive of VAT or VAT-exemt transaction
(2)
VAT complaint invoice or receipt
Caller
= End user of content
Access operator
= Content provider
€1 €0.80
€0.20(3)
€1(1)(2)
Caller/end user
Access operator
Content
provider
(1)
Price inclusive of VAT or VAT-exemt transaction
(2)
VAT complaint invoice or receipt
(3)
VAT invoicing requirement, as content provider is a VAT taxable person
Sophie Claessens & Tom Corbett§4A.03[A]
66

25. – the full selling price of the content price is part of the VAT turnover of the
access operator; and
– on the invoice or the bill issued by the access operator to the end-users (if any),
the content price is placed above-the-VAT-line, i.e., with VAT accounting.
Under an above-the-VAT-line approach, the VAT invoice flow coincides with the
money flow, which makes it a straightforward regime from a billing and accounting
perspective.
On the other hand, an above-the-VAT-line approach also has some VAT conse-
quences and risks that need consideration, including the following:
– lack of correspondence of the VAT invoice flows with the reality of the
contractual relations between the access provider, the content providers and
the customers;
– perception of the VAT model – even if no content rights are held – as implying
more product responsibilities than the access operator wants to assume;
– application of multiple VAT rates, zero-rates and exemptions, resulting in
increased complexity in terms of tax reporting, billing and accounting systems;
– limitation of the right to deduct input VAT resulting from the application of
VAT exemptions (e.g., games of chance and education);
– liability for foreign VAT registrations and foreign VAT liability when content is
sold to foreign customers, including the related foreign audit requirements;
– risk of double taxation when the content providers and the access operators
have no clear arrangements in place as to who will charge which VAT and on
what tax base;
– liability for other (indirect) taxes, depending on the content sold (e.g., games
of chance);
– reconciliation differences between the VAT turnover and the accounting
turnover, which differences may give rise to questions from tax authorities;
and
– application of chain liability rules in the event of non-compliance by other
parties in the supply chain (and even associated reputational and/or criminal
implications that this might create).
[2] Intermediated Delivery: Below-the-VAT-Line Billing
When a customer receives and pays for third-party content through one or more
intermediaries, the access operators and other service providers can also act as an
intermediary for payment and/or service delivery (disclosed agents), i.e., delivering
the content and/or collecting the content price in the name and on behalf of the content
provider.
Consider the following example of how below-the-VAT-line billing works in
practice, related to the purchase of content via a mobile device, from a Belgian
perspective. A consumer resident in the Netherlands plays an online game worth EUR
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.03[A]
67

26. 5, for which the content provider (merchant) is resident in Luxembourg. The consumer
downloads the game on her mobile device via an app marketplace. The consumer
decides to pay for this game through her mobile phone, which is operated by a mobile
phone operator in the Netherlands. The content price is charged on the customer’s
mobile telecom bill.
Figure 4.7 Parties Intervening in the Purchase of Content via Mobile Device
Two VAT issues can arise with this transaction.
The first issue concerns which VAT rate is to be applied? Under the rules
applicable until the end of 2014, both the Dutch and Luxembourg VAT authorities
could claim the VAT due on the final supply, i.e., place of establishment of the mobile
phone operator or the content provider. Under the new 2015 EU VAT rules, Dutch VAT
should always be due on the final supply, as that is the Member State where the
consumer belongs.
The second issue arises if both suppliers charge VAT on the final supply. In
principle, if the Dutch mobile phone operator had already deducted local VAT from the
EUR 5 price, the Luxembourg merchant should not apply any VAT on the final price.
Otherwise, the game will be subject to double taxation, leaving the Luxembourg
merchant with an unexpectedly reduced margin – or even no margin at all.
Some EU countries, such as Belgium, have introduced rules to avoid such double
taxation by allowing below-the-VAT-line billing,23
in which case the mobile phone
operator, if it were established in Belgium, would not charge any VAT on the EUR 5
charged for the content delivered by the third-party game provider. Instead, the mobile
operator will collect the EUR 5 as an advance payment and pay it over to the
Luxembourg game provider, whereas the latter should pay the final VAT due (15%
Luxembourg VAT under the old rules and 21% Belgian VAT as from 1 January 2015).
The financial flows, the relationships between the parties and the invoicing
process in such a scenario, which is referred to as below-the-VAT-line billing, can be
illustrated as follows.24
23. BE: Circular Letter E.T.109.696 (12 November 2009), as applicable from 1 April 2010.
24. This is the term used where the access operator(s) and other intermediaries charge VAT only on
their own services, not on the digital content that originates from the third-party content
provider.
Music
Game
Movie
App Store
Consumer
Mobile
phone
company
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68

27. Figure 4.8 Content Provider Contracts Directly with End User; Access Operator Acts
as Disclosed Agent vis-à-vis Content Provider25
Under such a below-the-line VAT scheme, the content provider contracts directly with
the end user and provides the digital content services to the end user. The access
operator merely provides telecommunication services (content delivery) and/or pay-
ment processing services to the content provider and is required to raise an invoice to
the content provider for his fees earned.
The key features of a below-the-VAT-line invoicing scheme are the following:
– the content provider is responsible for the correct VAT calculation and
collection from the end users, and for the payment of VAT collected to the tax
authorities;
– the access operator needs to issue a VAT-compliant invoice to the content
provider for its commission earned;
– only the commission earned by the access operator is part of the VAT turnover
of the access operator; and
– on the invoice or the bill issued by the access operator to the end user (if any),
the content price is placed below-the-VAT-line, i.e., without VAT accounting.
Under a below-the-line approach, the VAT invoice flow does not coincide with
the money flow, which makes it more complex from a billing and accounting
perspective. On the other hand, the liability for the correct VAT calculation and
payment to the tax authorities rests with the content provider, with all the compliance
requirements and system configuration needs this might bring in a cross-border
situation.
25. The solid arrows indicate the flow of services between the content provider and the end user of
the content (principal electronic service) on the one hand, and the access operator and the
content provider (carrier and/or collection service) on the other. The dotted arrows indicate the
money flow. The dashed arrows indicate the billing flow.
€1 €0.80
€0.20(3)
€1(1)(2)
Caller/end user
Access operator
Content
provider
(1)
Price inclusive of VAT or VAT-exemt transaction
(2)
VAT complaint invoice or receipt
(3)
VAT invoicing requirement, as content provider is a VAT taxable person
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.03[A]
69

28. §4A.04 EU VAT DIRECTIVE PROVISIONS AND IMPLEMENTING
PROVISIONS
The EU VAT Directive does not include any specific provisions to cater for the
identification of the person liable for VAT on electronic services provided through
intermediaries. However, Article 28 of the EU VAT Directive stipulates in general that
‘[w]here a taxable person acting in his own name but on behalf of another person takes
part in a supply of services, he shall be deemed to have received and supplied those
services himself’. Article 28 refers to the situation where goods are sold or services
performed pursuant to a contract under which a commission is payable on purchase or
sale.
The decision as to whether an intermediary qualifies as the supplier of the
electronic service or merely provides connectivity is a question of fact. If Member
States adopt a different approach as to who the actual supplier is, uncertainty can
result. Even if by 2015, the services are always taxable where the customer belongs
and, hence, the risk of double taxation evaporates, it is still necessary to pinpoint who
is liable to pay the VAT.
Against this background, Regulation 1042/201326
introduces a new Article 9a in
the VAT Implementing Regulation,27
with effect from 1 January 2015. Finally, the 2015
Explanatory Notes28
– although not legally binding – provide additional guidance and
practical examples on the application of this new Article 9a.
Article 9a provides as follows:
1. For the application of Article 28 of Directive 2006/112/EC, where electroni-
cally 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.
In order to regard the provider of electronically supplied services as
being explicitly indicated as the supplier of those services by the taxable
person, the following conditions shall be met:
(a) the invoice issued or made available by each taxable person taking part in
the supply of the electronically supplied services must identify such
services and the supplier thereof;
26. Council Implementing Regulation (EU) No. 1042/2013 of 7 October 2013 amending Implement-
ing Regulation (EU) No. 282/2011 as regards the place of supply of services (Regulation
1042/2013).
27. Council Implementing Regulation (EU) No. 282/2011 of 15 March 2011 laying down implement-
ing measures for Directive 2006/112/EC on the common system of value added tax as amended
by Regulation (EU) No. 1042/2013 of 10 October 2013 (VAT Implementing Regulation).
28. European Commission, Explanatory Notes on the EU VAT changes to the place of supply of
telecommunications, broadcasting and electronic services that enter into force in 2015, DG
TAXUD (3 April 2014) (2015 Explanatory Notes).
Sophie Claessens & Tom Corbett§4A.04
70

29. (b) the bill or receipt issued or made available to the customer must identify
the electronically supplied services and the supplier thereof.
For the purposes of this paragraph, a taxable person who, with
regard to a supply of electronically supplied services, authorises the
charge to the customer or the delivery of the services, or sets the general
terms and conditions of the supply, shall not be permitted to explicitly
indicate another person as the supplier of those services.
2. Paragraph 1 shall also apply where telephone services provided through the
Internet, including voice over Internet Protocol (VoIP), are supplied through a
telecommunications network, an interface or a portal such as a marketplace
for applications and are supplied under the same conditions as set out in that
paragraph.
3. This Article shall not apply to a taxable person who only provides for
processing of payments in respect of electronically supplied services or of
telephone services provided through the Internet, including voice over Inter-
net Protocol (VoIP), and who does not take part in the supply of those
electronically supplied services or telephone services.
[A] When Does Article 9a Apply?
The new Article 9a introduces the legal presumption that a taxable person who takes
part in the supply of electronic services or telephone services provided through the
Internet, including voice over internet protocol (VoIP), is acting in its own name but on
behalf of the provider of the services. This provision aims to apply the legal fiction laid
down in Article 28 of the EU VAT Directive (commissionaire arrangement) when the
following three requirements are met: (i) taking part in the supply of the electronic
services, (ii) acting in its own name (iii) but on behalf of another person. The legal
presumption implies that for each transaction in the supply chain between the
electronic service provider and the end consumer, each intermediary is deemed to have
received and supplied further the electronic or VoIP service itself.
The presumption may be rebutted only when (i) the original service provider is
explicitly indicated as the supplier by a taxable person taking part in the supply and
(ii) where this is reflected in the contractual arrangements between the parties
(cumulative conditions to be met simultaneously). These requirements must be met by
each party in the supply chain in order for that party not to be caught by the
presumption and, hence, be seen as the B2C supplier.
Furthermore, regardless of the contractual arrangements, this application of the
commissionaire arrangement is compulsory (i.e., may not be rebutted) where a taxable
person taking part in the supply authorizes the charge for the electronic services to the
final customer or the delivery of the services, or sets the general terms and conditions
of the supply of the electronic services. One of the three is enough to be left without the
possibility to escape from the application of the legal presumption.
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.04[A]
71

30. In terms of scope, the presumption of Article 9a covers not only electronic
services, but also telephone services provided through the Internet, including VoIP.
However, the presumption of Article 9a does not cover telecommunications and
broadcasting services, nor any other types of goods or services delivered through
intermediaries. Moreover, the presumption of Article 9a does not apply to taxable
persons which merely process the payments for electronic services or for telephone
services provided through the Internet, and which do not take part in the supply of
those electronic services or telephone services.
As regards the operation of Article 9a, the 2015 Explanatory Notes indicate that
the assessment of the supply chain should start from the final consumer and move
upstream in the chain. In other words, where several intermediaries could be caught by
the presumption of Article 9a, it is the intermediary closest to the final consumer that
will be the taxable person liable for VAT payment on the B2C supply
The following flowchart presents a high-level illustration of how Article 9a
should be applied.
Figure 4.9 Flowchart on the Application of Article 9a of the VAT Implementing
Regulation29
29. 2015 Explanatory Notes, supra n. 28, at 43.
Are you involved in the supply of electronic services or telephone services provided
via the Internet which are delivered through a chain of transaction?
(For more information see in particular point 3.4.3)
Do you provide only services which are not sufficiently
relevant in order for you to be seen as taking part in the
supply (such as payment processing or merely making the
communcation network available?)
(For more information see in particular point 3.4.3 and 3.4.4)
Do you want to rebut it?
(For more information see in particular point
3.4.2 and 3.4.5)
Do you authorise the charge to the customer and/or authorise the delivery
of the services and/or set the general terms and conditions of the supply?
(For more information see in particular point 3.4.6)
Is the following information identified in a sufficiently clear way on any
invoive issued to another taxable person or any bill or receipt issued to
a final consummer:
- the main service supplied (electronic services or internet telephone) and
- the supplier of that service (the initial service provider or an
intermediary covered by the presumption from Article 9a),
AND
is it refelceted in the contractual arrangements?
Your are caught by the presumption from Article 9a.
yes
yes
yes
yes
yes
You supply an
intermediary or
similar service
no
no
no
no
no
Article 9a does
not apply
You cannot rebut
the presumption.
Presumption. from
Article 9a applies.
You act as the service
provider of thr main
service.
In the situation you
supply telecommuni-
cations, broad-casting
or electronic
services to:
1) another intermediary
- you issue an
invoice,
2) a final consummer
- you issue a bill or
receipt and
- you are responsible
for VAT.
Sophie Claessens & Tom Corbett§4A.04[A]
72

31. [B] Taking Part in the Supply versus Carrying Content and/or
Processing Payments
The presumption of Article 9a applies only when a taxable person is taking part in the
supply (and therefore is deemed to act in its own name but on behalf of the provider of
the service). In order for a taxpayer or a tax authority to assess whether a taxable
person is taking part in the supply of services provided through a telecommunications
network, an interface or a portal, both the facts and the legal relations need to be take
into account. If there is a contradiction between the contractual arrangements and the
economic reality, the economic reality prevails.
The 2015 Explanatory Notes clarify that the reference to ‘taking part in the
supply’ in Article 9a should not be given a different meaning than that covered by
Article 28 of the VAT Directive, where reference is made to ‘a taxable person [that]
takes part in the supply of services’. At all times, the interpretation of Article 28 of the
VAT Directive should be based on EU law and not on national laws.
In this regard, the Court of Justice of the European Union30
has stated that,
concerning the application of Article 28 of the EU VAT Directive, one must consider all
the details of the case, and in particular the nature of the contractual obligations of the
trader concerned towards its customers.31
At the same time, the Court ruled that the
possible existence of a (national) provision on VAT extending the legal fiction under
Article 28 of Directive 2006/112/EC beyond the criteria laid down by that paragraph,
may not be taken into consideration in determining whether one acts in one’s own
name.
The 2015 Explanatory Notes give several examples and list indicators suggesting
that a taxable person takes part in the supply, including cases where the taxable person
owns or manages the platform over which the services are delivered; controls or exerts
influence over pricing; or owns the customer data related to the electronic supply.
Not all businesses involved in the supply of electronic or Internet telephone
services can be seen as taking part in the supply and hence be caught by Article 9a. A
typical example of this exclusion is providers of mobile payments platforms, which
providers are not seen as taking part in the supply of the content services if they merely
process the payments. Along the same lines, an Internet provider is not seen as taking
part in the supply when it is merely making the Internet network available for carrying
the content or collecting payment. In these situations, their participation is not
sufficient to be considered as taking part in the supply.
The situation where an Internet provider facilitates the flow of cash and/or
content but is not seen as taking part in the supply within the meaning of Article 9a, can
be illustrated as follows.
30. ECJ or the Court.
31. See e.g., BE: ECJ, 14 July 2011, Case C-464/10, Pierre Henfling et al.
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.04[B]
73

32. Figure 4.10 Internet Provider Facilitating Delivery of Content and/or Collection of
Payment (Not Caught by Article 9a)32
Judging from the 2015 Explanatory Notes, the intervention of a mobile operator in the
digital content supply chain can be more problematic. In cases where a mobile operator
merely facilitates the flow of cash and/or content (in the same way as an Internet
provider makes available the Internet network), that mobile operator should be treated
in the same way as described above and not be caught by Article 9a.
On the other hand, if a mobile operator is involved in any way other than merely
carrying the content and/or processing payments, its participation cannot be disre-
garded and the latter should be seen as caught by Article 9a. One of the tests to help
identify whether a mobile operator takes part in the supply, is to verify whether the
telecom network is essential for the content delivery or simply one of the possible
delivery methods. Another possible test is to verify whether the payment collection fee
32. 2015 Explanatory Notes, supra n. 28, at 30.
Content owner
(electronic service
provider)
Aggregator
(intermediary)
content
content
invoice
invoice for the
intermediation
bill/receipt
for the service supplied
cash and/or
content flow
cash and/or
content flow
invoice
App Store/
Portal
(intermediary)
Internet Provider
(faciliating delivery of countent and/or
collection of payment
(not in the chain)
Consumer
Sophie Claessens & Tom Corbett§4A.04[B]
74

33. earned covers only a simple charge to a bill or whether it covers other functions or risks
(such as bad debt risk).
The situation where a mobile operator acts as more than a payment service
provider or an Internet provider and, hence, should be seen as taking part in the supply
within the meaning of Article 9a, can be illustrated as follows.
Figure 4.11 Mobile Operator Caught by the Presumption of Article 9a33
[C] Conditions for Rebuttal of the Presumption
Where a mobile operator, an app store or a portal is taking part in the supply within the
meaning of Article 9a, for VAT purposes, the latter will be considered to supply the
electronic services or digital content in its own name (albeit on behalf of the content
33. 2015 Explanatory Notes, supra n. 28, at 31.
invoice
invoice
invoice
Content owner
(electronic service
provider)
Aggregator
(intermediary)
Mobile
Operator*
(intermediary)
content
content
content
content
bill/receipt
for the service supplied
App Store/
Portal
(intermediary)
Consumer
Chapter 4A: Intermediated Delivery and Third-Party Billing §4A.04[C]
75

34. owner or another intermediary with which it has contracted) and will be liable to
collect the VAT on the final supplies. The presumption of Article 9a may be rebutted by
an intermediary only under certain conditions. This means that if an intermediary
successfully rebuts the presumption, it is no longer deemed to receive and further
supply the service.
The provision is constructed in such a way that the presumption will apply unless
it is rebutted by a taxable person taking part in the supply meeting all of the following
conditions:
(1) ‘the provider of the service is explicitly indicated as the supplier by this
taxable person’, which means that:
– the invoice issued or made available by each taxable person taking part
in the supply identifies (i.e., there is a sufficiently clear indication) the
service in question and its supplier;
– the customer’s bill or receipt identifies the service in question and its
supplier (in other words, the taxable person must issue or make available
a bill or receipt to the final customer stating what has been supplied and
providing details of the supplier, including business name and VAT
identification number, for example);
– the taxable person taking part in the supply does not authorize the charge
to the customer (meaning, for example, that the app store is not
responsible for the payment between the final consumer and the content
owner of the app);
– the taxable person taking part in the supply does not authorize delivery
(meaning that the delivery, for example, of the app from the content
owner via the app store is not authorized by the app store); and
– the taxable person taking part in the supply does not set the general terms
and conditions of the supply (meaning, for example, that the terms of the
sale of an app via an app store are not set by the app store); and
(2) ‘this is reflected in the contractual arrangements’.
If the above conditions are met for each intermediary in the chain, the presump-
tion in Article 9a is rebutted and the electronic service provider will remain the supplier
of the services provided to the end consumer (notwithstanding the transactions by the
intermediaries in the supply chain). This implies that this service provider is the one
responsible for determining the place of supply and for the VAT on the service supplied
to the end consumer.
If, at any stage, in a supply chain involving several intermediaries, an interme-
diary cannot or did not successfully rebut the presumption, it is not possible for
intermediaries further down the chain to indicate the (original) service provider as the
supplier of the services. In that case, it will only be possible for them to go back up to
the (first) intermediary caught by the presumption.
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76

35. §4A.05 CONCLUSION
Where an electronic content provider relies on several intermediaries and different
distribution channels to market its products, that provider may not know when the
content is ultimately supplied and at what price, let alone that the provider would be
in possession of the necessary information to prove the location of the end users. In
these circumstances, the provider cannot reasonably be expected to correctly assess
and collect VAT on the final supplies. However, whilst onward resellers of electronic
content may be better placed to prove the location of end users, it can prove to be
equally difficult for them to know the exact nature of the content carried and the
applicable multiple VAT rates, exemption and rules.
The wording and operation of Article 9a of the VAT Implementing Regulation, as
applicable as from 1 January 2015, attempts to reconcile these interests, whilst securing
VAT revenue and ease of collection by the Member States. The provision seeks to
simplify the VAT accounting on complicated electronic supplies and distribution
chains. The wording of Article 9a recognizes the principle that the applicable VAT
system should be based on the underlying economic, commercial and legal relation-
ships between the parties.
An irrebuttable presumption against the telecom operator or platform provider
would have been unacceptable from this perspective, as it would have required an
amendment of Article 28 of the EU VAT Directive. Such a provision would go beyond
what can be defined in an implementing regulation and the drafting of explanatory
notes.
Throughout the process of drafting Article 9a VAT Implementing Regulation and
the accompanying Explanatory Notes, the EU Commission has taken great care to
consult widely with Member States, affected businesses and the indirect tax advisory
community to ensure that the legislation is fit for purpose and, to the extent possible,
to minimize the burden on business. In the authors’ opinion, however, the wording of
Article 9a and the interpretations given in the 2015 Explanatory Notes still raise a
number of questions and practical difficulties.
First, the extensive interpretation offered in the 2015 Explanatory Notes as
regards the cases where an intermediary may not rebut the presumption, could be
considered as going beyond Article 28 EU VAT Directive and therefore contestable in
court.
Second, even under a narrower interpretation of the scope of the presumption of
Article 9a, it cannot be excluded that some cases it will remain difficult for online
aggregators, platforms and mobile operators to assess with certainty when they take
part in the supply within the meaning of Article 9a. The involvement of an operator
may vary from one case to the next. For instance if a customer downloads an app via
his smartphone, the app may be delivered via the operator’s mobile network, unless
the customer is connected to a Wi-Fi network. In the latter case, the mobile operator is
involved only in the billing process, but not in the technical delivery.
Third, situations of double taxation could still occur post-2015, for example
when, at the end of the chain, two intermediaries ‘taking part’ in the supply can be
considered as equally close to the final customer, or when the different intermediaries
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36. are not aware of the others’ ‘interventions’, and therefore cannot assess how close they
are to the final consumer.
Fourth, the question also remains as to whether an intermediary caught by the
presumption is able to correctly assess and collect the VAT due. Indeed, although it
may be closest to the customer and therefore have access to relevant and reliable
information regarding the customer’s location, it may be unaware of the type of digital
content that is being provided – which can be a crucial element to assess whether
reduced VAT rates or exemptions apply.
Finally, it could be argued that having very strict and specific intermediary rules
for electronic services, as compared to goods sold (online) or supplies over the Internet
of services other than electronic services, is not desirable and in conflict with the
principle of equality and non-discrimination.
The proof of the pudding being in the eating, it now remains to be seen whether
and how the interpretations given in the Explanatory Notes will be endorsed by the
Member States, and might be confirmed by the Court of Justice of the European Union
in future.
Sophie Claessens & Tom Corbett§4A.05
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