EU – Court of Justice Ruling: APP store and Game Developers

On October 9, 2025, the Court of Justice of the European Union(CJEU) published a critical decision in case C-101/24, Finanzamt Hamburg-Altona v XYRALITY GmbH, that shed additional(and much-needed) legal certainty on the application of VAT when it comes to electronically provided services in the EU made through a facilitation intermediary.  

The Court’s standpoint on the extension of applicability of Article 28 of the European VAT Directive, and Article 9a of the EU VAT Implementing Regulation, in the cases of the in-app store purchases of digital products, could be used as a reference point for future understanding of the VAT liability that taxable digital marketplaces could have when they intermediate in the supply of services. 

This ruling also extends the understanding of the tax treatment of the supplies made through facilitating a digital platform, even before January 1, 2015, when the new place of supply rules came into force. 

Background 

The case concerns the definition of an actual tax framework and a substantively-based treatment for the digital service provider (a game developed with an establishment in Germany) and the operator of the App Store, whose place of business is in Ireland. 

Based on the factual material, the App Store (digital platform operator) controls the terms and conditions for in-app purchases, the user interface that the end customer follows during the purchase process, and payment processing for in-app purchases. 

However, the purchase order and accompanying sales receipt unequivocally indicate the German developer as the supplier and the application of the standard German VAT rate to the supply of services.

The app developer later argued before German courts that it has a right to a VAT refund because it is not accountable for VAT on the supplies of digital services “orchestrated” by an Irish-based digital platform. 

Under Article 28 of the EU VAT Directive, the developer of the game (the underlying supplier) should be treated as the supplier of services to the platform, and the platform operator should be accountable for supplying to customers.

The “intermediation fiction” clause establishes that, in particular cases, such as supplies made through a digital platform operator, there are, from a VAT perspective, two transactions. 

One is a B2B transaction, in which the underlying supplier makes a VAT-exempt transaction with the platform operator; the second transaction is a B2C transaction between the accountable platform operator and the end-user. 

If the CJEU finds this recital applicable to this case, then, for the B2B supply of services between the in-app game developer and the digital platform, the general place-of-supply rules will apply, given the lack of specific tax rules for this “sort” of transaction. 

Federal Court – Questions for CJEU

The German Federal Court referred three primary questions for a preliminary ruling before the CJEU: 

1. Considering the circumstances of the case, are taxable persons operating an App store acting as intermediaries under the EU VAT Directive? 
2. If the answer is yes, following the place of supply rules, is the supply of service from the game developer to the platform operator treated as a B2B sale under EU VAT Directive Article 44 or as a B2C supply under Article 45?  
3. (Ⅰ) Is it enough to rule that the German app developer is accountable for VAT, given the indication of tax ID data and VAT collection on the generated purchase order? (Ⅱ) Taking into account the specifics of this case, is it possible to attribute the role of “intermediary” under Article 28 of the VAT Directive to the app store operator? If the answer is yes, who is responsible for VAT collection, and what rules should be followed? 

Court of Justice: Ruling

The CJEU ruled on the submitted questions in the following manner: 

1. Deemed Supplier – App Store 

Even though the purchase order and accompanying sales documents clearly indicate that the game developer is the seller, that doesn’t automatically disqualify the applicability of the commissionaire provision. The court stated that one of the primary reasons this provision applies is the app store platform’s role in orchestrating the supply chain. 

The platform’s facilitation role should be primarily viewed from the perspective of all stages of the customer’s purchasing journey. The Court proceeded in this regard, even though Article 9a(clarification of the deemed supplier provision) of the Implementing EU VAT Regulation came into force on January 1, 2015; this article should be used as a clarifying and supportive provision for identifying the platform operator as the intermediary.  

This Article should be regarded as a complementary provision to the principle introduced earlier in Article 28 of the EU VAT Directive. 

2. The general place of supply rules should apply to the B2B provision of services, as well as to the deemed supply of services processed between the game developer and the app store operator. In this case, the place of supply is in Ireland. 

3. The German game developer is not accountable for German VAT for the B2C supplier, facilitated through the digital platform. 

Implications 

This critical ruling by the ECJ has the potential to serve as a strong reference point for future decisions, not only in cases brought before the ECJ but also within the ranks of domestic courts of Member States and other relevant public authorities. 

The applicability of the “deemed supplier provision” from the Implementing Regulation and the “intermediation clause” from the EU VAT Directive dictates, to a significant extent, the tax treatment of the transactions orchestrated by digital platform operators. 

Even though this ruling sheds light on the interpretability of the deemed supplier provision for in-app purchases orchestrated by a digital platform operator (app store operator), this tax treatment scenario cannot be blindly applied to all similar cases. 

To understand, and more importantly, to determine what tax treatment is the correct one for similar types of transactions, where we have at least three different sides(digital platform, digital service provider, and customer), we need to investigate(at least) the particularities of the following deeply:
The business model of the platform operator 

• The terms and conditions, the UI, and the UX from the customer perspective 
• Who controls the purchasing journey
• Who controls the payment process 
• Who is responsible for refunds and customer support

How to Stay Compliant 

The tax rules for cross-border providers of digital services or digital products can often be very complicated. Sometimes there are just too many unknowns, depending on, e.g., whether the service provider is making a direct sale, or if a digital platform operator facilitates the supply, the tax status of the recipient of service, where the place of the supply is, and whether this type of supply is even taxable in the chosen jurisdiction. 

It should be noted that tax frameworks for the digital economy are consistently being updated in some countries, while in other countries, they are a work in progress. Many taxable persons operating through digital platforms aren’t even sure who is accountable for VAT. 

Taking into consideration the latest Court of Justice ruling, as well as rulings in other jurisdictions on the digital economy, there are just too many unpredictable factors to account for when determining who is responsible for tax collection, when, and which rules the supplier should adhere to. 

For the past five years, we have successfully advised cross-border digital service providers. For more information on our services, kindly refer to our website. 

Author: Aleksandar Delic
Indirect Tax Manager – E-Commerce