- Iman Deschâtres
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The world of professional services has evolved into a borderless marketplace. Freelancers, consultants, and independent professionals now make up a substantial and growing share of the global workforce, offering everything from IT and design to legal and financial services from anywhere in the world. The service economy has become a powerful engine of growth – flexible, digital, and deeply international.
As services flow seamlessly across borders, governments have quickly adapted their tax systems to this new reality. Most have shifted the place of taxation for VAT or GST to the place of consumption, meaning the location of the customer controls rather than the location of the supplier. The European Union became the latest to follow this approach for services in January 2025.
The EU was among the first jurisdictions to shift VAT on digital services to the place of consumption and to transfer liability to the platform through which the services are offered via article 9a(1) of Implementing Regulation No. 282/2011. Initially, however, the EU’s definition of “digital services” covered only automated services without “human intervention”. Services requiring human input fell outside that scope and continued to be taxed at the provider’s location.
When updating their service-tax rules, several other countries adopted broader definitions and likewise shifted the obligations to register, collect, and remit VAT/GST from individual freelancers to the platforms that facilitate the transactions. This model is now used for example in Australia, New Zealand, Canada, India, Norway, and Singapore.
It should be noted that a regulatory gap may persist in the EU framework concerning the allocation of VAT collection obligations to platforms facilitating non-digital services. The amendments on place of consumption effective January 2025 did not extend platform liability to such services. Nor does the VAT in the Digital Age (VIDA) initiative remedy this omission, as its deemed-supplier rules are confined to accommodation and passenger transport platforms.
Article 28 of the VAT Directive may be applied to determine service platform liability on the basis of two judgments of the Court of Justice of the European Union: Fenix International (C-695/20) of 28 February 2023 and Xyrality (C-101/24) of 9 October 2025. The article provides that “where a service is provided through the intermediary of a taxable person acting in his own name but on behalf of another person, the taxable person concerned shall be deemed to have received and provided that service himself.”
The Fenix International judgment indicates that Article 9a(1) of Implementing Regulation (EU) No 282/2011 merely clarifies the concept contained in Article 28 of the VAT Directive, namely the VAT liability of the intermediary.
This means that, although the article in question was not drafted with platform models in mind but rather with the notion of an opaque intermediary, it may still be applied to platforms supplying services.
Indeed, in the Xyrality case the Court notes that Article 28 applies to all types of services.
The case law also indicates that an end customer’s awareness of the supplier’s identity does not, by itself, exclude the application of the concept of intermediary; other relevant factors must be assessed. In evaluating the concept of undisclosed agent, the focus should be on the powers the taxable person exercises in relation to services supplied through them.
In the absence of a specific regime, such as the one for digital services which clarifies how the rules apply, the burden is effectively on the platforms to assess their role on a case-by-case basis in order to determine liability. Notably, the German court observed that end customers had to register with the app store and accept its terms of use before purchasing products. It suggests that the customer experience will be key in determining who is liable.
This lack of clarity creates several challenges- aside from the obvious legal and financial implication, the accounting determination as to how a platform should recognise its income is critical. If a service platform treats itself as a deemed supplier for VAT purposes based on article 28, can it recognise only the commission earned as revenue, or must it recognise the full gross proceeds, given that the article ostensibly addresses opaque intermediaries? Might the answer differ under different country’s GAAP regimes?
If applying such an article for VAT purposes requires recognition of the full gross amount rather than just the commission, the revenue accounting for EU-sourced transactions may differ from practices in other jurisdictions with deemed-supplier rules or even within the EU if the platform is providing services and digital services. It is not only a theoretical question for if we are taking into account that certain EU Member States levy turnover taxes, such states may consider taxing the full gross income as the technically correct (but potentially inequitable) approach.
This will also create challenges for freelancers who provide services through multiple platforms. They will have to navigate a maze to determine in which countries they are liable for VAT/GST. The answer may vary not only by country but by platform, since each may adopt a different approach based on its specific factors. Most freelancers will no doubt lack the knowledge and systems to cope and this will create a reporting and financial distortion among freelancers.
The current situation is reminiscent of the unsustainable model in Europe before 2015, when Apple collected VAT under a commissionaire model, while Google treated itself as a transparent agent and did not account for VAT on behalf of app developers.
Once again, there is no one-size-fits-all solution; systems need to be clear and transparent, flexible and easily adaptable, pragmatic and equitable.
Disclaimer: The views, statements or opinions expressed in this article are solely those of the author and do not represent tax advice and are not to be designated to be the views, statements or opinions of any other person, group, association or company.
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