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(Photo and quotes: Tax consultant Dr. Markus Müller)
In February 2023, the European Court of Justice (ECJ) passed a judgement that could have far-reaching financial consequences for OnlyFans Creator – in a positive sense! According to the ruling, it may be possible to reclaim incorrectly levied VAT from German and other European tax authorities. The decision with the reference number C 695/20, which has received little attention in the media to date, essentially states that creators in the EU are not – and have not been – liable to pay VAT on their income generated by OnlyFans.
Often enough, German (and other European) tax authorities, for example, claimed VAT on this. However, this could now have been unlawful following the judgement of the ECJ.
CASZIN quotes with the kind permission of tax consultant Dr. Markus Müller from KMLZ Rechtsanwaltsgesellschaft mbH (contact at the end of the article).
The decision is a blessing for OnlyFans Creator. Anyone operating outside the UK who has paid VAT to the tax authorities in the past should immediately check the possibility of applying for a refund.
Tax consultant Dr. Markus Müller
The tax consultant also has a formulation ready for the tax office:
Based on the decision, creators can also argue for comparable platforms that they are providing a B2B service to the platform in accordance with Section 3a (2) UStG. If the platform is based abroad, the sales are therefore not taxable in Germany.
Of course, the background is, as always, a little complicated. The decisive factor is who exactly is providing a service for whom. Before the court judgement, OnlyFans took the view that the creators were providing a service directly to the fans. The platform itself would effectively only be an intermediary and therefore only responsible for the commission charged. However, the UK tax office took a different view and this has now essentially been confirmed by the ECJ. Accordingly, OnlyFans is not just an intermediary, but rather a kind of middleman who buys and then sells services.
However, the UK tax authorities assumed a service commission on the basis of Art. 9a para. 1 of the VAT Directive in conjunction with Art. 28 of the VAT Directive (under German law: Section 3 para. 11a UStG). This means that the creators provide a B2B service to OnlyFans and OnlyFans in turn provides an electronic B2C service to the subscribers. As a result, OnlyFans would have to pay VAT on the entire subscription price worldwide, depending on the consumer’s place of residence.
OnlyFans always adds VAT to the total amount paid to the customer when purchasing content. However, this does not change the problem described above.
It is true that OnlyFans charges local VAT. Nevertheless, many creators in Germany (and other countries) have mistakenly paid VAT, which can now be reclaimed.
Tax consultant Dr. Markus Müller
It could therefore become really expensive for Fenix Ltd. And complicated. Because in this case, everything would have to be itemised and paid to the individual national tax offices.
Tax consultant Dr. Markus Müller agrees:
For OnlyFans and comparable social media platforms, the decision leads to far-reaching declaration and recording obligations. The provision of services or brokerage services to influencers is negated for VAT purposes. If the platform provides electronically supplied services and the customer is a private individual, which is the case in the vast majority of cases, the place of supply is based on the customer’s place of residence in accordance with Section 3a (5) UStG. In accordance with Art. 24a and Art. 24b of the VAT Directive, the portal must then carry out a comparatively complex check of where the service is consumed and pay VAT in accordance with the requirements of this state.
However, it is also decisive whether the sale of content constitutes “electronically supplied services”. However, the ECJ did not address this issue.
The proceedings did not address the question of whether the OnlyFans content is actually all electronically provided services. This seems plausible when simply viewing posted videos and photos. However, real-time streams and private messages require more than minimal human involvement, which is contrary to an electronically supplied service and the application of the Services Commission. Platforms must carefully analyse whether a service is provided electronically.
So things could still get exciting. In the case of custom videos, for example, the content is produced individually for each fan on their behalf.
Judgement of the ECJ: https://curia.europa.eu/juris/liste.jsf?language=de&td=ALL&num=C-695/20
Message from Reuters: https://www.reuters.com/world/europe/onlyfans-loses-uk-vat-fight-eu-top-court-2023-02-28/
Further information from the author of the above quotations:
Dr. Markus Müller, LL.M.
Steuerberater, Dipl.-Finanzwirt (FH)
Tel: +49 211 54 095 387
E-Mail: markus.mueller@kmlz.de
https://www.kmlz.de/
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