Latest from the courts

Readers of a nervous disposition may want to look away now.

In the case of Geelen C-568/17 (in French) the advocate General (AG) was asked for an opinion on the supply of what was coyly called webcam sessions.

Background

The defendant in the main proceedings, Mr Geelen, was a VAT registered person in The Netherlands. He provided the services of the organisation and provision of interactive erotic sessions broadcast live over the Internet. The models were located in the Philippines and Mr Geelen provided them with the necessary hardware and software to transmit the sessions over the Internet. Customers contacted the models via a website after creating an account for this purpose. The sessions were broadcast live and were interactive, which meant that customers had the opportunity to communicate with the models and give them instructions. The services provided by the defendant were intended for the Dutch market. I set out the arrangements here, as I am sure that none of my readers will be aware of such things * polite cough *

This is interesting as an example of technology overtaking legislation which was enacted before such services could even be contemplated (well, by the people drafting the VAT legislation anyway).

The issue 

The issue was where was the place of supply of these services. If they were in The Netherlands, then Dutch VAT would apply, but if they were deemed to be outside the EU, no EU VAT would be payable. The tax authorities considered that such services were subject to VAT in The Netherlands and issued a tax assessment notice.

Technical

Generally, the rule is that for B2C services the place of supply (POS) is where the supplier belongs. However, there is an exception for cultural, artistic, and entertainment activities. These are taxed where performed (outside the EU in this case if the exception is applicable).

Opinion

It was the AG’s opinion that, in the first place, there was no doubt that the services in question were entertaining…

However, he opined that the only way to provide cultural activities, entertainment, education, etc. was either to bring service users together at the actual place of service delivery, or to provide a service at the location of the users.

The technological development that has taken place since the relevant legislation was drafted has enabled services in which beneficiaries participate remotely, sometimes even actively, in a cultural, entertainment or other event, without necessarily doing so in real time. In a cultural reference: The “unity of action, time and place”, to refer to the categories of classical theatre, was thus upset.

In the AG’s opinion, these services were not intended to be covered by the exception. Consequently, these were not services “supplied where performed” and the general B2C rules applied, so the POS was The Netherlands and Dutch VAT was applicable.  It was concluded that performance does not take place where the models are based, or where the consumer was located, but where Mr Geelen brought together all elements of the supply.

Summary

The legislation must be interpreted as meaning that the services of organising and providing live interactive webcam sex do not constitute services for entertainment purposes within the meaning of the relevant provisions.