VATupdate

ECJ Case C‑568/17 (Geelen) – Judgment – Live interactive erotic webcam sessions – Place where a service is actually performed

Source Curia

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.

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.

Informal translation

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.

The Dutch Supreme Court asked the European Court of Justice for a preliminary ruling (summarised):

  • Where are live interactive erotic webcam sessions that are provided for a fee subject to VAT? Can they be regarded ‘entertainment services’, which are subject to VAT in the country where the actual activities/event take(s) place (as Geelen argues), or are these ‘electronically supplied services’, subject to VAT in the country where the customers are, in case of private individuals (as the tax authorities argue)?
  • Or is there another outcome, as to how should the place of the service be determined?

Judgment:

The European Court of Justice rules as follows:

1) A complex service, which consists of offering live interactive erotic webcam sessions, is an ‘entertainment activity’ or ‘amusement activity’, which must be considered to be ‘materially’ or ‘actually’ take place where the service provider has established his seat of business or a permanent establishment from which he provides the service or, failing that, his place of residence or his usual place of residence.

2) As the recipients of the live interactive erotic webcam sessions are all located in the Member State of the service provider, it is not necessary to answer the question if these services qualify as ‘electronically supplied services’.

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