I. At a glance
By streaming videos and uploading them to video platforms, streamers generate considerable revenue every year. In addition to income from subscriptions and advertising, income is also generated from voluntary payments from viewers to the streamer (so-called donations).
The ruling by the Düsseldorf Fiscal Court (Finanzgericht, FG) on March 4, 2022 was the first fiscal court decision on the VAT treatment of donations from viewers to streamers of a livestream. In the case at hand, the Düsseldorf Fiscal Court was of the opinion that the requirements for a VATable exchange of services were met.
The Schleswig-Holstein Ministry of Finance has now also commented on this topic in its brief information note dated 8.05.2023 (VI 3510 - S 7100-767). According to this, voluntary payments (so-called donations) to the creator of a video (e.g. due to an appeal for support or reward when watching the video on a video platform) are subject to VAT as remuneration for other services. The same applies to voluntary payments in the context of a stream to persons who broadcast live content on a streaming platform (so-called streamers).
II. In detail
1. background
By producing videos ("streaming") and processing ("uploading") via video platforms, streamers generate various revenues from advertising, subscriptions or do-nations, among other things.
With donations, viewers can send money directly to a streamer. To do this, they usually have to access the video platform's system or use an external payment service provider. The transaction via the payment service provider also takes place with the help of the video platform via hyperlinks or buttons that are integrated into the video platform and visibly stand out from the rest of the content of the video platform form (so-called panels). Viewers are encouraged to make donations through the presentation of the video platform and by animating the streamer (e.g. mentioning them by name during live streams or chat functions).
Until the ruling of the Düsseldorf tax court, there was no established case law regarding the VAT treatment of donations. The tax court based its decision on a ruling on the "street musician case law" of the European Court of Justice (ruling of 3.3.1994, C-16/93 (Tolsma)).
There is a controversial debate in the literature as to whether a voluntary payment by viewers to a streamer actually constitutes remuneration for a VATable exchange of services. The European legislator therefore saw the need to include the following addition in the new version of Art. 54 para. 1 of the VAT System Directive (Directive EU 2022/542) with effect from January 1, 2025:
"However, where the services and related services concern activities which are transmitted by streaming or otherwise made available virtually, the place of supply shall be deemed to be the place where the non-taxable person is established or has his permanent address or usually resides"
2. judgment of the Düsseldorf tax court dated 4.03.2022 - 1 K 2812/19 U
In the ruling of the Düsseldorf tax court, a streamer was active on the internet via a streaming platform. He used the streaming platform to generate income and increase his level of awareness. He generated the income primarily through advertising and donations. By clicking on panels on the streaming channel's website, viewers had the opportunity to watch the plaintiff either live or as a video as he participated in computer/video games and developed the respective role-playing game in various roles. By clicking on the "Subscriber" panel, viewers were given the opportunity to subscribe to the plaintiff's site. By clicking on the "Donation" panel, the viewer could send money to the plaintiff.
The tax office is of the opinion that the donations are taxable income of the plaintiff for his activity as a streamer and increased the taxable turnover accordingly.
The Düsseldorf tax court rejected the claim as unfounded. It was of the opinion that the plaintiff provided other services in the form of entertainment services within the meaning of sec. 3 para. 9 sentence 1 UStG with its streaming activity on its channel. The streaming platform itself represents the "stage on the internet". According to the tax court, the clicking and following of the plaintiff's streams by the viewers represents a monetary end use, as with a visit to the theater and the following of the entertainment and performance. The payments of the donations by the viewers are causally based on the plaintiff's entertainment performance and are therefore not comparable to donations by passers-by to a street musician (see ECJ, judgment of 3.3.1994, C-16/93). In contrast to a passer-by, who does not specifically intend to receive a musical performance from a street musician, the plaintiff's viewers specifically visit his channel for entertainment purposes. This is also not contradicted by the fact that the payment of the respective donation is made on a voluntary basis and the amount itself is at the discretion of the viewer. This is because an exchange of services is not excluded by the fact that the consideration, regardless of the amount, is provided voluntarily, provided that there is an internal link between it and the service.
The viewers who voluntarily made donations to the plaintiff also constituted identifiable recipients of his streaming services.
III Outlook and impact on practice
In the above-mentioned judgment, the Düsseldorf Tax Court assumed an exchange of services between the streamer and the viewer without examining whether the operator of the video platform is involved in the chain of services between the streamer, streaming platform and viewer within the meaning of sec. 3 para. 11a of the German VAT Act. In cases in which electronic services are provided via a telecommunications network, an interface or a portal, it must be assumed in accordance with sec. 3 para. 11a sentence 1 UStG that an entrepreneur involved in this provision is acting in its own name but on behalf of the entrepreneur providing the electronic service. This presumption means that for every transaction that is carried out in the supply chain between the provider of an electronic service and the end consumer, every intermediary is deemed to be the recipient of the electronic service, who then provides this service to another recipient.
It is not entirely clear why the tax court did not investigate whether the operator of the video platform is included in the supply chain. Particularly as income from subscriptions is to be classified as remuneration for services to the operator of the video platform for VAT purposes.
A direct exchange of services between the streamer and the viewer means that the service is taxable at the viewer's place of residence in accordance with Section 3a (5) UStG. The streamer may then have to register for VAT abroad and pay the VAT there or use the one-stop-shop procedure. Furthermore, the streamer must also determine the place of residence of each individual viewer, which may not always be unproblematic.
Streamers should therefore check whether the statements of the Düsseldorf tax court are fulfilled and whether they actually deliver directly to viewers and not to the streaming platform itself.
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