ECJ C-596/20 (DuoDecad) – Question – Place of supply of e-commerce support services

On 12 November 2020, the Fővárosi Törvényszék (Hungarian court) lodged questions to the ECJ about the place of supply rules for services, in particular to find out who should be considered as customer for VAT purposes.

Article in the EU VAT Directive

Articles 2 (1) (c), 24 (1) and 43 of Council Directive 2006/112/EC of 28 November 2006

Article 2 (Taxable transaction)
1. The following transactions shall be subject to VAT:
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

Article 24 (Taxable transaction)
1. “Supply of services” shall mean any transaction which does not constitute a supply of goods.

Article 43
For the purpose of applying the rules concerning the place of supply of services:
1. a taxable person who also carries out activities or transactions that are not considered to be taxable supplies of goods or services in accordance with Article
2(1) shall be regarded as a taxable person in respect of all services rendered to him;
2. a non-taxable legal person who is identified for VAT purposes shall be regarded as a taxable person.


  • DuoDecad was founded in 2007 with computer programming as its main activity.
  • DuoDecad’s main customer was Lalib to whom the applicant issued invoices for a total amount of € 8,086,829.40 between July and December 2009 and during the entire 2011 calendar year for services provided in the field of support, maintenance and implementation.
  • Following an inspection, the Hungarian tax authorities established a tax debt (HUF 458,438,000) due to unpaid VAT and a fine was imposed as well.
  • DuoDecad lodged an objection against that decision
  • The Portuguese company Lalib was founded in 1998 under Portuguese law. In the period examined, its main activity was the provision of electronic entertainment services.
  • The defendant maintains that the actual customer of the services provided by the DuoDecad to Lalib was not Lalib, but WebMindLicenses (hereinafter: WML).
  • In its action against the defendant’s decisions, DuoDecad submits that the service was provided to Lalib and that Portugal is the place of supply, since all the conditions laid down by the Court are fulfilled.


1. Must Articles 2 (1) (c), 24 (1) and 43 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax (‘the VAT’) Directive ‘), to be interpreted as meaning that the licensee of the know-how – a company established in a Member State of the Union (in the main proceedings Portugal) – is not the person providing the services made available to end users through a website , and cannot therefore be the recipient of the technical services in support of the know-how of the taxable person established in the second Member State (in the main proceedings, Hungary), as a subcontractor, and not in the sense that the latter provides this service for the licensor of the know-how established in a Member State,in the situation where the licensee

(a) had rented offices, IT and other office infrastructure in the first Member State, own employees, extensive experience in e-commerce, an owner with an extensive international network and a driver with training in e-commerce,

(b) received the know-how describing the operational processes of the websites and their updates, provided it with comments and proposals for changes and approved it,

(c) was the recipient of the services provided by the taxable person on the basis of this know-how,

(d) received regular reports on the performance of the contracts by the subcontractor, (in particular on the traffic on the websites and payments from bank accounts),

(e) registered in her name the domain names that ensure internet access to the websites,

(f) was listed as a service provider on the websites,

(g) took measures to monitor the reputation of the websites,

(h) concluded the agreements necessary for the provision of the service with partners and subcontractors (in particular with the banks that allowed payment by bank card on the websites, performers who provided the content of the websites and webmasters who promoted the available content),

(i) had the complete system for receiving the revenues from the service to the end users, such as bank accounts over which it had the exclusive and full power of disposal, the database containing the data of the end users, which enabled it to invoice the provide services provided, and proprietary billing software,

(j) stated on the websites its own registered address in the first Member State as physical customer service and

(k) as an undertaking was independent from both the licensor and the subcontractors established in Hungary in charge of carrying out certain technical processes described in the know-how,  taking into account that (i) the foregoing has been confirmed by the tax authority of the first Member State, which body is best able to confirm these objective elements verifiable by third parties, (ii) to the provision of services via the websites from the second Member State stood in the way of the objective obstacle that the company established in the second Member State did not have access to payment service providers that could guarantee the acceptance of bank card payments on the websites, which prevented the services offered through the websitesnor after the period under investigation by the company established in the second Member State and (iii) the licensee and its related companies have made higher profits from operating the websites than the amount of the difference between the first and second VAT rate applied in the Member State?

2. Must Articles 2 (1) (c), 24 (1) and 43 of the VAT Directive be interpreted as meaning that services made available through a website are provided to end-users by the licensor of the latter, established in the second Member State? the know-how, so that it is the recipient of the technical support services of the know-how provided by the taxable person as a subcontractor, and the latter does not provide those services to the acquirer of the license established in the first Member State, in the situation where the licensor

(a) had its own resources consisting exclusively of a rented office and a computer used by its driver,

(b) had no personnel other than the director and an in-house counsel working part-time for several hours a week for the company,

(c) did not have any agreements other than the agreement on the development of the know-how,

(d) was the holder of the domain names, which, according to the agreement between the licensor and the licensee, the latter registered in her own name,

(e) never has as a provider of the relevant services towards third parties, in particular end users, banks that enabled payment by bank cards on the websites, performing artists who provided the content available on the websites and webmasters who promoted the available content presented,

(f), with the exception of the license fee invoices, has never issued supporting documents in connection with the services offered through the websites and

(g) did not have a system (a bank account and other infrastructure) through which the revenue from the services provided could be received,  It should also be borne in mind that, according to the judgment of the Court of 17 December 2015, WebMindLicenses, Case C-419/14 (EU: C: 2015: 832), it is not in itself of overriding importance that the director and the licensor’s sole shareholder is the developer of the know-how and that same person exercised influence or control over the development and exploitation of that know-how and the services based on this know-how, where the director and owner of the licensor is the natural person who is also a director and / or owns the subcontractors, including the applicant’s company, who, by performing their duties on behalf of the licensee, cooperated as a subcontractor in the provision of services?





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