The Jerusalem Post
The Jerusalem Post: Business and Innovation

Your taxes: EU VAT applies to software as a service (SAAS)

Euro banknotes and coins are displayed in a shop in Brussels, Belgium November 14, 2017 (photo credit: REUTERS/ERIC VIDAL)
Euro banknotes and coins are displayed in a shop in Brussels, Belgium November 14, 2017
(photo credit: REUTERS/ERIC VIDAL)

As always, consult experienced tax advisers in each country at an early stage in specific cases.

The EU Court of Justice recently issued a VAT judgment that not only takes a last blast at Britain, it also causes collateral tax damage to Israeli and other non-EU online platforms if they supply services to EU consumers. The case concerns Fenix International (CJEU C-695/20 of February 28, 2023). Israeli, US and other e-commerce operators should take note.

Electronically supplied services – main EU VAT rules:

The Fenix case (see below) clarified and upheld an EU VAT liability for services supplied electronically by a supplier anywhere to EU consumers (B2C)

Since 1 January 2015, all telecommunications, radio and television broadcasting and services supplied electronically (with little or no human intervention) are taxable in the EU country in which the customer is established, has his permanent address or usually resides, regardless of where the taxable person supplying those services is established.


Furthermore, where a taxable person (e.g. electronic platform) acting in his own name, but on behalf of another person, takes part in a supply of services, he shall be deemed to have: (1) received and (2) supplied those services himself (EU VAT Directive Article 28).

Euro (illustrative) (credit: Courtesy)
Euro (illustrative) (credit: Courtesy)

EU regulations create laibility

EU implementing regulations say this makes the platform liable to EU VAT unless: (1) the provider is “explicitly indicated” as the supplier by the platform, and (2) that is reflected in the contractual arrangements between the parties (Implementing Regulation Article 9a).

An ”explicitly indicated” supplier is one: (1) identified on an invoice, bill or receipt, together with (2) the electronic services supplied by that supplier.

But the platform “takes part” and cannot shift the VAT liability to an “explicitly indicated” supplier if the platform carries out any of the following regarding electronically supplied services: (1) authorizes the charge to the customer or (2) authorizes the delivery of the services, or (3) sets the general terms and conditions of the supply.

These rules do not apply to a platform which only provides for processing of payments, but does not take part in the supply of those electronically supplied services or telephone services.


Details required on invoices include: (1) name and address of the platform and of the customer; (2) quantity/extent of goods/services supplied. Sufficiently detailed records must generally be retained 10 years from the end of the year the supply was carried out.

Rates of VAT:

The standard rates of VAT in the EU range from 16% in Luxembourg to 27% in Hungary.

The Fenix Case:

Fenix International (‘Fenix’), a company registered in the United Kingdom for VAT purposes, operated a social media platform known as “Only Fans”. That platform was offered to “users” throughout the world, who are divided into “creators” and “fans”. Fenix provided not only the Only Fans platform, but also the device enabling the collection and distribution of the payments made by fans using a third party payments entity. 

Fenix also set the general terms and conditions of the platform. Fenix levied a commission of 20% on any sum paid to a creator. All payments appeared on the relevant fan’s bank statement as payments made to Fenix. Fenix collected UK VAT on the 20% commission, and this appeared on the invoices which it issued. The UK tax authority (HMRC) demanded VAT on 100% of the sum received from a fan, not just on the 20% commission, over the period from July 2017 to January 2020.

The EU Court of Justice upheld the HMRC VAT demand. Fenix was acting as agent of Only Fans. But the Fenix platform authorized payment and/or delivery and/or set general terms and conditions, making it liable for VAT on all amounts (100% not 20%) which the platform collected. The court rejected arguments that the EU Council lacked authority to implement such rules.


Online platforms located anywhere in the world are now generally liable to EU VAT on services supplied electronically with little or no human intervention to EU consumers (B2C). This catches SAAS (software as a service) suppliers everywhere. For example, it catches electronic tuition but may not catch human tuition. Israeli hi-tech includes many SAAS businesses.

Similar EU rules apply to goods.  EU VAT rules introduced in July 2021 impose EU VAT on “electronic interfaces” (including online platforms) located anywhere in the world if they “facilitate” the B2C supplies of goods imported into the EU valued under EUR 150 or any goods already in the EU.

As always, consult experienced tax advisers in each country at an early stage in specific cases.

The writer is an accountant and international tax specialist at Harris Consulting & Tax Ltd.