On November 23 2023, the Court of Justice of the European Union (CJEU) issued a judgment (C-532/22, SC Westside Unicat) concerning the scope of Article 53 of the VAT Directive as regards the place of supply of services related to admission to online events.
Background to the Westside Unicat case
The case concerns a Romanian company, Westside Unicat, that operates a video recording studio at which erotic streaming takes place. An American-established company, StreamRay US, streams the erotic videos recorded by Westside Unicat on its website, providing the interface and allowing interaction between the performers and consumers.
The Romanian Tax Administration issued an assessment under which Westside Unicat owed the output VAT from the supply of services to StreamRay US. With regard to the place of supply of services, the assessment had as its basis Article 53 of the VAT Directive, related to admissions to events; namely, the place where the event actually takes place.
The Romanian Tax Administration understood that the service provided by Westside Unicat should be subject to Romanian VAT, as the recording was taking place in the company’s facilities, located in Romania.
Following the dispute between the parties, the case was referred to the CJEU.
The opinion of the CJEU
The CJEU has brought clarity to the issue by providing a narrower scope to the application of the special place of supply of services rule of Article 53 of the VAT Directive.
In the first place, in its judgment the CJEU gives an interpretation of the concept “service in respect of admission to an event”, clarifying that the supply of services ought to have a clear link with granting admission to the event.
In other words, services in respect of admission to entertainment events as referred to in Article 53 of the VAT Directive are those in which the essential characteristic is the granting of the right of admission to an event in exchange for a payment. Therefore, the specific place of supply rule of Article 53 of the VAT Directive cannot be applied to any type of activity that is somehow connected to the celebration of an event. It must be understood as applying only to services consisting of marketing the right of admission to the event.
In application to the case at hand, the CJEU determined that the services provided by Westside Unicat to StreamRay US shall not be subject to Romanian VAT as the nature of the service is not granting admission to the streaming but to provide a necessary service for the show to be broadcasted by StreamRay US. Therefore, according to the opinion of the CJEU, the place of supply of the services shall be determined by the general place of supply rules, which are established in Article 44 of the VAT Directive in the case of B2B supplies.
The reasoning behind the CJEU's decision is that to correctly determine the place of provision of a service, one must always question whether the case is covered by articles 46–59a of the VAT Directive, which regulate the special place of supply rules. If the answer is no, then the service should be covered by the standard place of supply rules, which are regulated in articles 44 and 45 of the VAT Directive.
It is not the first time the CJEU has followed this reasoning. We can see a similar approach in its judgment in case C‑647/17, Srf konsulterna.
A welcome addition to the case law on online events
Considering all the above, it seems clear, and this has been judged by the CJEU, that Article 53 of the VAT Directive does not apply to services provided by a video chat recording studio to the operator of an internet streaming platform for the purpose of the latter streaming them on that platform. Following the above-mentioned reasoning, if the service is not covered by Article 53 of the VAT Directive, it should fall within the scope of Article 44 of the same directive.
The VAT Committee had already ruled on the matter in 2021, when it almost unanimously agreed that the provision of digital content between VAT-able persons so that it can be accessed online by consumers later should not fall within the scope of Article 53 of the VAT Directive.
Although the VAT Committee gave its opinion on this topic in 2021, the other major case of the CJEU regarding this matter (C-568/17, Geelen) was a long time ago. For this reason, this new judgment is welcome among the VAT community, as the misinterpretation of the place of supply provision by EU member states can lead to serious consequences for taxpayers, making the principle of legal certainty dubious.
