New circular of the German Federal Ministry of Finance concerning the VAT treatment of various digital services
On 29 April 2024, the German Federal Ministry of Finance (BMF) published a circular that clarifies the VAT treatment of certain digital B2C services. It refers to the digital supply of pre-produced content, live streaming and the service commission via streaming portals such as YouTube.
For online content, the BMF distinguishes between the types of service offered as the differentiation is of importance for determining the place of supply but may also be relevant for the tax rate.
The supply of pre-produced content that can be individually accessed by individuals via the Internet constitutes an electronic service. The place of supply is therefore the place of residence of the recipient according to German VAT law.
In contrast to on-demand content, live streaming of an event is not a supply of an electronic service. Cultural, artistic, scientific, educational, sporting, entertaining or similar services are taxable at the supplier´s location. The destination principle will be introduced in such cases on the 1st January 2025.
In most cases, businesses use external portals to provide the above services. In such scenarios, it must therefore be examined whether a deemed supply of an electronic service exists. This is particularly the case if another company is involved in the supply of the service, which is provided via a telecommunications network, an interface or a portal.
Key Takeaway
The destination principle for pre-produced content often creates compliance issues for suppliers as, in practice, the recipient´s location cannot always be identified. Platforms should also verify whether they are making a deemed supply when offering online content. Place of supply and rates may also vary. Businesses must therefore make sure that they make the correct distinction.
