VAT owed because of VAT statement in the invoice

Background – ECJ ruling C-101/24, XYRALITY

Between 2012 and 2014, end users were able to download a games app from the German app developer XYRALITY onto their devices free of charge via an Irish app store. Within the games app, customers could make paid in-app purchases, i.e. unlock benefits within the app. The app store was authorised to collect payments from customers. This was done via the payment methods within the app. To this end, several pop-up windows bearing the app store’s logo appeared within the app. The app developer, XYRALITY, was not mentioned. Following the purchase, the app store issued order confirmations to customers which named the German app developer as the supplier and showed German VAT.

The ECJ ruled that a supply chain within the meaning of Article 28 of the VAT Directive had been in place, as the app Store had acted in its own name but on behalf of the app developer. Consequently, the app developer had supplied the electronic service to the app Store, which in turn had supplied it to the end customer. The fact that XYRALITY was named as the supplier on the order confirmation does not change this conclusion, as an order confirmation is, by its very nature, only issued after the purchase transaction has been completed.

The place of supply of the app developer’s service to the app Store is, in accordance with Article 44 of the VAT Directive, the place where the app Store is established, i.e. in Ireland.

Although the order confirmation showed German VAT and named the app developer as the supplier, the app developer does not owe VAT under Article 203 of the VAT Directive (VAT owed because it is shown in an invoice). The ECJ assumed that the electronic services in question had been supplied solely to non-taxable persons. In accordance with its previous case law, no VAT liability therefore arises under Article 203 of the VAT Directive. The ECJ left open the question of whether the order confirmation could be regarded as an invoice within the meaning of that provision at all.

Federal Fiscal Court (BFH) ruling

The Federal Fiscal Court (BFH) upheld the tax office’s appeal, set aside the judgment of the Hamburg Fiscal Court, and referred the case back for further hearing and decision. It must be clarified whether, and to what extent, the recipients of the services were non-taxable persons or taxable persons. This is relevant to a possible VAT liability. The Regional Tax Court has jurisdiction to clarify the facts of the case; the Federal Fiscal Court therefore referred the matter back to it. Should there be non-taxable persons among the customers, the second step is to examine whether the order confirmation contains the mandatory details justifying taxation and whether the order confirmation can be regarded as having been issued on behalf of the app developer.

Analysis

It is likely to be difficult to determine the proportion of non-taxable persons. In the second reference in the P-GmbH case (C-794/23 of 1 August 2025), the ECJ ruled that, in the case of a small-value invoice without the recipient’s name, an estimate was permissible. It should also be borne in mind that customers of this type of gaming app are generally not taxable person, and the burden of estimating the proportion of taxable persons is at the app developer’s expense. It should therefore remain at the lower end of the conceivable scale.

Since 2015, Article 9a of the VAT Implementing Regulation must also be observed, according to which a supply chain is generally assumed unless the provider of the electronic service is expressly named as the supplier. This option does not apply if the app store authorises billing to the end customer, approves the provision of the service or sets its general terms and conditions. Players in the app business must observe these conditions closely so as not to inadvertently trigger a VAT liability or fail to meet their VAT obligations.

Author: Nadia Schulte