Comments on ECJ case C-101/24 (Xyrality): ECJ Confirms Deemed Reseller Rule for App Store In-App Purchases

The CJEU’s judgment in the Xyrality case C-101/24 affirmed that digital platforms can be held responsible for VAT obligations in transactions occurring on their platforms, emphasizing that actual control and role in the transaction matter more than mere formal designations of parties involved.
The court clarified that the application of Article 28 of the VAT Directive does not hinge on the customer’s awareness of the actual service provider, reinforcing the necessity for intermediaries to demonstrate substantial involvement in the service provision to be considered as acting “in their own name.”
The ruling serves as a precedent for digital platforms, highlighting an ongoing trend where VAT responsibilities are increasingly shifting towards these platforms as they play a significant role in the transactions they facilitate, echoing earlier judgments regarding the nature of platform services.

Source MDDP

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The CJEU ruled in favor of Xyrality, a German app developer, determining that under pre-2015 VAT rules, the sale of digital services via an Irish app store should be treated as a supply from Xyrality to the app store, not directly to end consumers, thereby placing the VAT liability in Ireland rather than Germany.
The Court emphasized that Article 28 of the VAT Directive establishes a legal fiction of two supplies: the first from the developer to the intermediary and the second from the intermediary to the final consumer, asserting that the identification of the principal in order confirmations does not negate the application of Article 28.
The judgment clarified that since the supplies were not to taxable persons, the taxpayer cannot be held liable for the VAT, aligning with Article 203, which specifies that VAT is only payable by those who enter it on an invoice, mitigating the risk of tax loss for the German developer.

Source KPMG

ECJ confirms that app stores must be treated as resellers for VAT purposes when facilitating in-app purchases, even when acting on behalf of app developers
The ruling applies to situations where customers make paid purchases within free mobile games through pop-up windows displaying the app store logo and payment system
App stores are considered to act in their own name during the purchase process, despite later order confirmations showing the app developer as the service provider
The decision relates to VAT rules before January 2015 changes, though ECJ notes newer regulations should inform interpretation of existing directives
Place of supply for deemed services between app developers and app stores follows standard business-to-business VAT location rules

Source: kmlz.de