ECJ C-69/23 (Streaming Services Srl) – Questions – Place of taxation of interactive sessions with Erotic content

On , the ECJ issued the preliminary ruling in the case C-69/23 (Streaming Services Srl).

Context:

Article in the EU VAT Directive

Articles 44, 53 and 59a of the EU VAT Directive 2006/112.

Article 44 (Place of supply of services)
The place of supply of services to a taxable person acting as such shall be the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the taxable person who receives such services has his permanent address or usually resides.

Article 53
The place of supply of services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions, and of ancillary services related to the admission, supplied to a taxable person, shall be the place where those events actually take place.

Article 59a (Use & Enjoyment)
In order to prevent double taxation, non-taxation or distortion of competition, Member States may, with regard to services the place of supply of which is governed by Articles 44 and 45, Article 54(1), second subparagraph, and Articles 56, 58 and 59:
(a) consider the place of supply of any or all of those services, if situated within their territory, as being situated outside the Community if the effective use and enjoyment of the services takes place outside the Community;
(b) consider the place of supply of any or all of those services, if situated outside the Community, as being situated within their territory if the effective use and enjoyment of the services takes place within their territory.

Facts

The applicant, Streaming Services Srl, is a taxable person registered for VAT purposes in Romania, whose principal activity is the supply or transfer of copyright, for consideration, in audiovisual material — generally in the context of online interactive erotic sessions (but also the supply of offline recorded material) — for the benefit of owners of digital platforms (websites) in the video chat sector, which are taxable legal persons in EU Member States and in third countries.
Specifically, the company, as a video chat studio, provides to various natural persons in Romania (known as models or video chat artists), streaming services and equipment, decorations, furniture, technical assistance services, specialist and language courses and beauty services, thus facilitating access by the models to digital live streaming platforms owned by the party with which it has a contract, and at the same time providing the necessary logistical foundations so the models may obtain maximum revenue from their activity.
Video chat models are self-employed, do not report to the studio and are not employees of it; they enter into a contract for the provision of services with the applicant company and assign image and/or copyright rights to it. At the same time, they are not employed by the website operators, since the relationship is established through the intermediary of the applicant, Streaming Services Srl.
The video chat models carry out interactive erotic sessions and transfer, for consideration, the content created, and the related copyright, for the benefit of the applicant company – the video chat studio – in return for a price determined as a percentage of the revenue generated by the activity carried out. The applicant, in turn, then transfers the digital content together with all copyrights to the website owner, at a price that is also determined as a percentage of the revenue generated by the model’s activity. Thus, the owner of the streaming platform ultimately acquires the copyright in the digital content.
The owner of the streaming platform organises interactive sessions for the beneficiary/end customer, a natural person, in exchange for a price that it has set. In that regard, the owner of the streaming platform controls access by end-users to the live content, filters the content by category, provides information about the streaming rules, imposes sanctions or removes content in the event of breach of the internal rules of conduct and collects the fee for the service provided to the end user (in the pay-per-view system).
The owner of the streaming platform is the only party actually offering access to the event and collecting the final fee from the video chat session customer. The models are not in the same State as the end consumer. The applicant does not know the end customers, does not issue them with invoices, does not ask them for money or receive money from them and does not have access to customer data. The owner of the website is the only person in direct contact with the customers, namely the natural persons who are the consumers of the digital content.
Between 23 December 2020 and 16 March 2021, a tax inspection was carried out at the applicant’s premises to verify VAT compliance for the period from 1 November 2015 to 31 July 2020.
On 31 March 2021, a tax assessment notice was issued by which additional tax charges were established against the company, consisting in the VAT to be collected in respect of the services at issue, regarded as taxable in Romanian territory, in the amount of RON 3 852 908 (Romanian lei) (approximately EUR 780 000), plus some ancillary obligations (interest and late-payment penalties).
The applicant lodged a tax objection, which was rejected by decision of 14 October 2021. In those circumstances, it brought an action before the Curtea de Apel București (Court of Appeal, Bucharest), the referring court, requesting that the fiscal administrative acts issued pertaining to it be annulled.

Questions

For the purposes of the uniform interpretation and application of [EU] law, does the supply of digital content such as that at issue in the main proceedings, consisting in interactive erotic sessions, filmed and transmitted in real time by electronic/internet means, provided by a taxable person in one Member State of the European Union (P1, video chat studio) to another taxable person in another EU Member State (P2, online live streaming platform), constitute an intraCommunity supply of services subject to the general rules laid down in Article 44 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (VAT Directive), or does it constitute the grant of admission to an entertainment event within the meaning of Article 53 of the VAT Directive?
When interpreting and applying Article 53 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (VAT Directive) and Article 32(1) of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for the VAT Directive, in which place are the events to be regarded as actually taking place, in the case of activities consisting in interactive erotic sessions, filmed and transmitted in real time by electronic/internet means (used in video chat activity), such as those at issue in the main proceedings, where:
(a) the natural person (model) and the video chat studio,
(b) the live streaming platform and
(c) the natural person paying a fee for access to such live streaming services (end customer) are located in different Member States or third states?
Depending on the reply given to the first two questions: in which of the three EU Member States should value added tax on the supply of services be, respectively, declared and paid?
Do the VAT Directive and the principle of the prevention of double taxation preclude national tax legislation, such as Article 307 of Legea nr. 227/2015 (Law No 227/2015), under which:
(a) the national tax authorities of the State of the provider may classify crossborder services provided by a taxable person in one EU Member State (P1 – video chat studio), consisting in the supply (transfer) of digital content such as that at issue in the main proceedings to a taxable person in another Member State (P2), by means of an online live streaming platform in another State (P3), as services giving admission to an entertainment event, pursuant to Article 53 of the VAT Directive, with the result that the VAT relating to those services must be collected and paid to the Treasury of the State in which the provider’s registered office is situated, whereas, at an earlier point in time, the same services were classified by the tax authorities of the State in which the recipient of the services is established (P2), by way of a fiscal administrative act which became final in the absence of any judicial challenge, as intra-Community supplies of services covered by the general rule laid down in Article 44 of the VAT Directive? Is it possible for the tax authorities of a State to which the matter is subsequently referred or which are acting on their own initiative to make a legal classification of the cross-border services that are subject to a tax inspection in that State that differs from the legal classification already adopted for the same services, under a fiscal administrative act that has become final in the absence of any judicial challenge, by the tax authorities of the other State to which the matter was originally referred or which acted on their own initiative, thereby giving rise to the double taxation of VAT, or are the tax authorities to which the matter is subsequently referred or which act on their own initiative bound by the legal classification of the cross-border services in question by the tax authorities to which the matter was originally referred, which has become final as a result of the absence of any challenge and is [therefore] not open to judicial review?
(b) In the light of the answer given to the above questions, in a case such as that at issue in the main proceedings, pursuant to the VAT Directive and the principle of the prevention of double taxation, which place is to be regarded as the place of supply of services?

AG Opinion

Decision

Summary

Streaming Services Srl is a Romanian company that supplies audiovisual material, including online interactive erotic sessions, to owners of digital platforms. The company provides streaming services and equipment to video chat models, who are self-employed and enter into a contract for the provision of services with the applicant company. The models transfer the content created and related copyright to the applicant company, which then transfers it to the website owner. The website owner organizes interactive sessions for end customers and collects the final fee. A tax assessment notice was issued against the applicant for VAT compliance, which the company objected to and brought before the Court of Appeal, Bucharest.

Source