Selling through a platform: Who is responsible for VAT?

Entrepreneurs often engage in trade through platforms or operate a platform themselves. In such cases, it is crucial to determine the appropriate VAT treatment since questions arise as to who is providing services to whom and what the VAT treatment should be. In this article, we look at four scenarios:
  1. The platform operates under its own name and for its own account.
  2. The platform acts as a commissionaire, i.e., the platform operates under its own name but on behalf of another person.
  3. The platform is the ‘deemed’ supplier.
  4. The platform is the intermediary/agent, i.e., it operates under its own name but on behalf of another person.

Own name and own account

The platform operates under its own name and for its own account.The platform purchases goods or services from the seller and resells them under its own name and for its own account. This situation only applies to goods if the platform has obtained ownership of the goods, even if it’s for a brief period of time.

The platform as a commissionaire

There is a specific provision in the VAT rules that addresses the situation where an intermediary operates under its own name but on behalf of another party. If the intermediary is taking part in the supply of goods, the rule implies that there are two subsequent separate supplies: one from the seller to the platform followed by a supply from the platform to the customer. If an intermediary is involved in the supply of services, there is a supply of a service from the seller to the platform  followed by the supply of a service  from the platform to the customer. This means that the supplies are identical, and the platform is considered to have supplied the goods or serrvices from the seller to the customer.

The platform as the ‘deemed’ supplier

In some situations that do not necessarily involve the first or second scenarios, the EU has created a deeming provision whereby the platform is deemed to receive the goods or services supplied by the seller and subsequently supply them to the customer. The following situations are covered by the deeming provision: 
  • Services provided electronically, e.g., e-books, apps, music and providing access to digital concerts;
  • B2C sales of goods yet to be imported into the EU; and
  • B2C sales of goods within the EU by a non-EU-based seller. 
Different conditions apply to these situations. 

The platform as the intermediary/agent

If the platform is acting in the name of and on behalf of the seller andthe platform is not the deemed supplier, the platform is acting as anintermediary/disclosed agent. The platform then performs a service, often an intermediaryservice to the seller. It is the seller who supplies the goods or servicesdirectly to the buyer for VAT purposes.

Schematic view

These scenarios can be visualized as follows. Although scenarios 1 to 3 differ from each other, the VAT treatment is the same.

Scenario 1 to 3


Scenario 4

 

Risks

It is critical to accurately identify which situation applies to a particular platform , which can be challenging because contracts are often not drafted with VAT in mind. Nevertheless, it is essential to make a correct VAT determination, as failure to do so may result in additional tax assessments and penalties.

More information?

Would you like to know more about the VAT implications of trading through a platform or operating one yourself? Our VAT specialists are happy to assist!