Skip to main content

Selling on electronic interfaces – who is accountable for VAT?

Indirect Tax Matters - January 2023

The rapid move towards technology-driven commerce facilitated by electronic interfaces, such as websites, online marketplaces, portals, platforms etc., continues to challenge sales tax systems across the globe.

In the EU, the legislators are constantly working on updating the VAT rules not only to ensure collection of VAT, but also to simplify reporting requirements and create equal trading conditions for suppliers operating both in and outside the EU. Initial moves included the introduction of the Mini one-stop-shop (MOSS) in 2015 which became the broader One-stop-shop (OSS) as part of the new VAT e-commerce rules introduced in 2021. The VIDA proposals aim to further extend the scope of the OSS with the aim of effectively introducing a single VAT return that traders could use to declare and settle pan-EU VAT liabilities.

With new electronic interface-based business models constantly emerging, application of the current e-commerce VAT rules can prove challenging. This is evident by a recent CJEU case Fenix International (C-695/20) where the taxpayer has challenged the validity of a deeming provision under Article 9 of the Implementing Regulation, which provides that e-services delivered through an online platform are deemed to be supplied by the platform itself.

With this in mind, as various tax authorities across the EU are turning their focus to the electronic interfaces that facilitate transactions and as more and more VAT obligations are being imposed on such interfaces, we consider the existing legislation and guidance to determine whose obligation it is to account for the VAT on on-line sales?

Who is accountable for VAT?

Electronic interfaces connect various third parties looking to sell their goods and services directly to the consumer. This democratisation of retail has meant that tax authorities have struggled to collect tax due from small sellers who can be based anywhere in the world. Not only is there an absolute underpayment of tax, this gives non-EU sellers a perceived competitive advantage against EU sellers, and gives on-line sellers a perceived advantage against bricks and mortar retailers. To tackle this problem the electronic interfaces which facilitate the supply can be ‘deemed’ to have made the supply in question, even though they hold no direct contractual relationship with the purchaser for the supply being made.

Supply of goods

The 2021 e-commerce changes that came into effect in June 2021 deem electronic interfaces that facilitate business to consumer (B2C) supply of goods in the EU, such as marketplaces, liable for the VAT due on such supplies in very limited cases. In order to fall within a scope of ‘deemed supply’

1. The online intermediary must:

  • Be considered an ‘electronic interface’

The EU Council Implementing Regulation (EU) 2019/2026 makes reference to an “electronic interface”, such as ‘a marketplace, platform, portal or similar means’. As such, the definition of an electronic interface is intentionally very broad.

  • Be considered to ‘facilitate’ the supply.

The EU Council Implementing Regulation (EU) 2019/2026 defines the term facilitate as ‘the use of an electronic interface to allow a customer and a supplier offering goods for sale through the electronic interface to enter into contact which results in a supply of goods through that electronic interface’. However, according to the Implementing Regulation, facilitation does not occur where the electronic interface:

- does not set the terms and conditions of the supply;
- is not involved in authorising the charge for the payment made by the consumer;
- does not have involvement in the ordering/delivery of the goods.

It must be noted that all of the above conditions must be met for facilitation not to occur – i.e. if, for example, the electronic interface authorises a charge for the goods offered, it will be viewed as facilitating the supply.

2. The supply must relate to one of the following:

  • Imported goods (by EU or non-EU sellers) with intrinsic value not exceeding €150 being sold to the EU consumers under the distance selling arrangements; and
  • Goods, regardless of value, being sold by non-EU sellers to EU consumers. It does not matter whether the sale is on a domestic basis or subject to the distance selling arrangements.

Supply of services

In relation to deemed supplier rules for the supply of telecommunications, broadcasting and electronic (TBE) services, have been in place since 2015. Similar to the rules for goods operator of the electronic interface can be deemed to be acting as an ‘undisclosed agent’ of the service provider. For VAT purposes this means that the platform, app store, marketplace or web-shop is treated as buying the service from the supplier and selling it to the customer. As a result, for B2C supplies, the liability to collect VAT for the supply of service to the final customer in the county where the customer is located would rest with the electronic interface operator.

The above is true, unless the third-party supplier is ‘explicitly indicated’ as the supplier through contractual arrangements, including being identified as the supplier of the underlying services on the related invoices. Similar to the legislative provisions applicable to the supply of goods (detailed above), the electronic interface is not allowed to ‘explicitly indicate’ the third party as a supplier if it performs one or more of the following:

  • sets the terms and conditions of the supply;
  • is involved in authorising the charge for the payment made by the consumer;
  • is involved in the delivery of the service.

As evident from the above, the deeming provisions cover a wide range of circumstances, allowing some room for interpretation. For example, the definition of an electronic interface is broad, and any electronic interface can be brought within the remits of the deeming provisions by simply authorising a charge for payment (in addition to connecting the seller with the customer). Indeed, the AG in Fenix suggested that the setting of terms for use of the website was in itself, sufficient to “set the terms and delivery of the supply”. Thus, it appears it is very difficult for electronic interfaces not to be bound by the deeming provisions.

Upcoming changes

Although electronic interfaces are already subject to scrutiny, the EU’s ‘VAT in the digital age’ initiative has proposed updates to the current VAT rules, including increased transparency of transactions and supplementary record keeping requirements.

A number of the EU countries are already ahead of time when it comes to electronic invoicing, real time transaction reporting and provision of data by electronic interfaces on seller transactions. However, the upcoming changes will bring uniformity across the EU.

The most imminent of the obligations will come into effect on 1 January 2023 under the Seventh amendment to Directive on Administration Cooperation (DAC 7). These will require electronic interface operators that offer their business in the EU to provide data on income derived by both EU and non-EU businesses and individuals through their interfaces (i.e., marketplaces, platforms etc.). The reporting obligations will cover income derived from goods and certain services like provision of immovable property, means of transport, personal services etc., with the deadline for reporting such 2023 figures being 31 January 2024, followed by continuous annual reporting thereon. It is envisaged that such information gathered by the individual Member States will then be shared with other relevant authorities across the EU.

Further to the above, Central Electronic System of Payments (CESOP) is expected to come into effect from 1 January 2024. This will require payment service providers to supply information on cross-border payments originating in the EU and the recipient of such payments. The information will be consolidated on the EU database and made available to relevant authorities across the EU.

Additional changes applicable to electronic interfaces brought by the ‘VAT in the digital age’ initiative released on 8 December 2022 include the application of deemed supply rules to passenger transport and short-term accommodation platforms with effect from 1 January 2025.

However, perhaps the most far-reaching proposal is to greatly widen the deemed seller provisions relating to sales of goods within the EU. Art 14 A has been amended to ensure that the marketplace, platform or other interface will be treated as the seller in relation to all sales of goods within the EU. This is a very significant step that will place a heavy burden on the interface operators.

Irish Context

As part of the Report on the Accounts of the Public Services 2021 published by the Irish government in September 2022, it has been acknowledged that ‘Revenue considers that they do not need a specific strategy for e-commerce’. This is based on the updates introduced at the EU level during recent years and the expected introduction of CESOP in 2024. As such, any developments in the area of taxation of supplies through electronic interfaces and the related reporting requirements are expected to follow hand in hand with the developments unfolding in this area at the EU level.


One thing is sure, there are challenges brought by constantly emerging electronic interface business models to the collection of VAT and there is a clear indication that tax authorities across the EU, including Irish Revenue, will progressively adapt digital technologies to meet these challenges.

With the upcoming changes in mind, which will make activities by both electronic interface operators and the third parties providing goods/services through such interfaces more transparent, it is now more important than ever that parties involved in these supplies are aware of their VAT obligations. A proactive approach should be taken by electronic interfaces to appraise compliance with the existing and upcoming obligations by:

  • reviewing the nature of supplies and the supply chains, keeping in mind deeming provisions;
  • reviewing contractual relationships;
  • establishing whether a liability to register and account for VAT exists. If so, a choice needs to be made, either register for VAT in all EU countries where a VAT liability exists or avail of simplified VAT reporting through OSS;
  • establishing whether a reporting obligation under DAC 7 exists. If so, inform third party sellers of the requirements and ensure that the systems are in place and capable of recording and transmitting the required information.

For more details on any items mentioned in the article or for assistance with determining VAT obligations, please contact Sandija McCann or any of the team below.

Did you find this useful?

Thanks for your feedback

If you would like to help improve further, please complete a 3-minute survey