Comments on ECJ C-101/24: AG Opinion – The operator of the app store makes mobile applications available to the EU

XYRALITY (C-101/24) – AGO – Electronic services (game applications for mobile devices) – treatment of supplies via app store – pre 2015 rules – taxpayer win

Background on VAT Rules: Prior to the 2015 VAT reforms, sales of digital services had differing place of supply rules for EU and non-EU sellers, with intermediaries lacking specific regulations for their role in these transactions.
Taxpayer’s Argument: The German app developer contended that under Article 28, the app store in Ireland was the intermediary, making the supply of services subject to Irish VAT instead of German VAT, as they believed the app store facilitated the sale to end consumers.
Court’s Consideration: The Advocate General supported the interpretation of Article 28 to apply to electronically supplied services, indicating that the app store acted as an intermediary and should be treated as having received and supplied those services, despite the rules being pre-2015.

Source KPMG

Advocate General Szpunar concludes that Article 28 of the VAT Directive applies to electronically supplied services, specifically mobile applications and additional services offered through an app store, for the period before 1 January 2015. This interpretation clarifies the VAT treatment of digital services during that timeframe.
Between 2012 and 2014, the German company Xyrality GmbH provided mobile applications, particularly games, via an app store operated by company X, based in Ireland. Purchases, including in-app purchases, were confirmed and charged by X, which raised questions about the proper VAT treatment and the place of supply for these transactions.
Xyrality initially considered itself the service provider to final customers, asserting that Germany was the place of supply for VAT purposes under Article 45 of the VAT Directive. However, in 2016, it shifted its position, claiming that X was the actual supplier of services to end customers, suggesting that the service was exclusively provided in Ireland (citing Articles 44 and 45). The German tax authorities contested this, viewing X as merely an intermediary, thus regarding Xyrality as the true service provider, leading to the referral of questions to the court for a preliminary ruling.

Source Taxlive