On November 23, 2023, the ECJ issued its decision in the case C-532/22 (Westside Unicat).
Context: Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 53 – Services consisting of providing access to entertainment events – Place of supply of services – Broadcast of interactive streaming video sessions – Provision of premises and equipment necessary for video capture of shows as well as provision of support with a view to providing quality shows
Article in the EU VAT Directive
Article 53 in the EU VAT Directive 2006/112/EC.
Article 53 (Place of supply of cultural, artistic, sporting, scientific, educational, entertainment and similar services, ancillary transport services and valuations of and work on movable property)
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.
Facts
- The applicant at first instance operates a video chat business, providing adult entertainment services. For that purpose, it has concluded association contracts with various natural persons (‘performers’) who participate in interactive sessions of an erotic nature (‘sessions’) and also a streaming contract with StreamRay INC, a legal person registered in Nevada (the United States of America), which operates a website through which final customers are given access to the sessions.
- Under the association contracts, the applicant provides the performers with premises from which to work, along with the necessary materials for their sessions, and advises them on how to ensure that the services provided are of a certain quality. It also provides part of the technical support needed for the live streaming of the sessions to final customers (webcams and microphones). In addition, the applicant represents the performers in their dealings with StreamRay for the purposes of the collection and receipt of the sums due to them in return for the services they provide, and the sums due to the performers are paid exclusively by the applicant.
- Under the streaming contract, in which the applicant is identified as the organiser of the sessions, the original content of the sessions is ploaded to a website operated by StreamRay for the entertainment of its customers worldwide. Thus, the sessions are filmed and transmitted in real time, and customers are able to interact with the performers. The streaming contract also provides that the final customers are StreamRay’s customers and that it is that company that sets the fees to be paid by customers and collects payment thereof, while the applicant and the performers receive a certain percentage of that revenue. It is also apparent from the contract that, after the sessions have been streamed, the copyright in the digital content belongs to StreamRay.
- StreamRay is the party that provides final customers with actual access to the sessions in question and it concludes contracts with natural persons for that purpose. It is apparent from those contracts that the services in question are provided by StreamRay. It creates access accounts for customers, manages the types of services and packages of services offered to customers, sets the relevant fees and payment methods and receives the corresponding sums.
- The applicant was the subject of an inspection by the tax authorities with regard to the assessment of value added tax (VAT) for the period from 1 September 2019 to 30 June 2020. The tax authorities found, on that occasion, that the applicant had recorded income of 3 399 056 Romanian lei (RON) on the basis of invoices issued [to] StreamRay. However, at the time when those invoices were issued, the applicant believed that the provision of services [to] StreamRay was exempt from VAT in Romania, for the reason that the place where those services were provided could not be regarded as being within the territory of that Member State.
- However, the tax authorities took the view, on the basis of Article 278(6)(b) of the Tax Code and the judgment in Geelen, that the services had been supplied in Romania, since those services were related to the granting of access to entertainment events and the applicant was the organiser of those events. As a result, by a notice of assessment dated 13 November 2020, the applicant was required to pay the sum of RON 640433 by way of VAT in respect of the abovementioned revenue.
- The administrative appeal which the applicant brought was dismissed by decision of 4 February 2021 of the Regional Directorate-General of Public Finances, ClujNapoca.
- The applicant brought an action challenging those two decisions before the Regional Court, Maramureș, which was, in part, upheld by judgment of 19 October 2021. The court found that, given the factual context of the case, StreamRay was not merely an Internet access provider. Indeed, the service provided by the applicant was of benefit to StreamRay, even though it was the latter company that provided customers, on a ontractual basis, with access to the sessions for which they paid a participation fee. Consequently, that company was the provider of those services, in the sense accepted in paragraph 1 of the operative part of the judgment in Geelen.
- It was also held in that judgment that the services were provided by the applicant to a taxable person in a country outside the European Union, from which the final customer purchased the integrated video chat service, which was provided and made available to the final consumer only through the ownership of a website, software and a dedicated server, all of which were owned by StreamRay. The court of first instance thus took the view that the services provided by the applicant were not related to the granting of access to entertainment events.
- As regards the place of supply of those services, the court of first instance considered that, in the judgment in Geelen, the Court of Justice had ultimately held that the taxation of services such as those at issue had to be carried out at the place where the supplier was established and not at the place where the show was physically performed by the performers.
- The defendants at first instance have brought an appeal against that judgment before the referring court.
Questions
1. Is Article 53 of the VAT Directive to be interpreted as applying to services of the type at issue in this dispute, which is to say services provided by a video chat studio to a website operator, consisting in interactive sessions of an erotic nature filmed and transmitted in real [time] via the Internet (live streaming of digital content)?
2. In the event that the first question is answered in the affirmative, then, for the purposes of interpreting the phrase ‘the place where those events actually take place’, appearing in Article 53 of the VAT Directive, is the place where the performers appear in front of the webcam relevant, or the place where the organiser of the sessions is established, or the place where customers see the images, or should some other place be taken into account?
AG Opinion
None
Decision
Article 53 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2008/8/EC of 12 February 2008,
must be interpreted in the sense that:
it does not apply to services provided by a video chat recording studio to the operator of an Internet distribution platform and consisting of producing digital content in the form of interactive video sessions of an erotic nature filmed by such a studio with a view to making them available to this operator for the purposes of their distribution by the latter on said platform.
Summary
The case C-532/22 involves a reference for a preliminary ruling regarding the interpretation of Article 53 of Council Directive 2006/112/EC. The case concerns services provided by a video chat recording studio to an operator of an Internet distribution platform. These services consist of producing digital content in the form of interactive video sessions of an erotic nature, which are filmed by the studio and made available to the operator for distribution on the platform.
The referring court sought clarification on whether Article 53 of the directive applies to these services and, if so, which location should be considered relevant for determining the place of provision of these services.
The Court’s ruling states that Article 53 of Directive 2006/112 does not apply to the services provided by the video chat recording studio to the operator of the Internet distribution platform. The Court explains that the specific connection rule set out in Article 53 applies to services consisting of providing access to cultural, artistic, sporting, scientific, educational, entertainment, or similar events, as well as ancillary services related to this access, provided to a taxable person. However, the services in question do not fall within the scope of Article 53 because they do not involve granting customers the right to access the content or ancillary services related to such access. Instead, these services are necessary for the distribution of the content by the operator on the platform.
The Court also notes that the possession and use of equipment by the video chat recording studio for capturing and recording the video sessions are not sufficient to consider that the studio grants access to the sessions. The Court refers to guidelines from the VAT Committee, which state that the supply of digital content by one taxable person to another taxable person, who then provides interactive sessions to end customers, does not fall within the scope of Article 53.
Therefore, the Court’s ruling clarifies that Article 53 of Directive 2006/112 does not apply to the specific services described in the case.
Source
Similar ECJ cases
Reference to the case in the other EU MS
Newsletters
- Join the Linkedin Group on ECJ VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
