The judgment reaffirmed that the question of whether an intermediary should be subject to Article 28, such that they are treated for VAT purposes as buying in and resupplying the services, should be based on a factual analysis of all the circumstances, but that in principle Article 28 could apply despite the end users receiving order confirmations that specified the name of the principal supplier. The judgment provides useful guidance regarding the interaction between Article 9a and Article 28, but stopped short of adopting so broad an interpretation of Article 9a as that suggested by the Advocate General’s opinion in this case.

In depth

Background

Legal provisions

Article 28 of Council Directive 2006/112/EC ("EU VAT Directive") provides that where a taxable person (an intermediary), acting in their own name but on behalf of another person (the principal), takes part in a supply of services, the intermediary will be deemed to have received and supplied those services. This fiction means that the intermediary is responsible for the VAT obligations arising on the supply to the customer, and should expect to receive an invoice from the principal representing a sale of the underlying goods and services from the principal to the intermediary.

Article 9a of the EU Implementing Regulation 282/2011 was introduced with effect from 1 January 2015 and introduces, with respect to services supplied electronically through a telecommunications network, an interface or a portal, such as a marketplace for applications, a presumption that an intermediary is acting in his own name but on behalf of another person, unless that other person is explicitly indicated as the supplier and the intermediary is not responsible for authorising the charge to the customer, authorising delivery of the content or setting the general terms and conditions of the supply.

Factual background

XYRALITY GmbH ("Xyrality"), a company established in Germany, develops and supplies mobile phone apps (games). The apps are made available to end users (assumed to generally be consumers) via an app store operated by a company incorporated in Ireland (referred to within the judgment as “X”).

The apps were downloaded by end users free of charge from the app store. End users then had the ability to make in-app purchases that enable them to advance in the games. Those purchases were also made via the app store platform operated by X: in-app purchases took place in a separate window marked with X’s logo and it was X that confirmed the purchase and charged the price for the in-app purchase. End users were only informed about the identity of the actual service provider (Xyrality) in the order confirmation sent to them via email by the app store. The order confirmation showed that German VAT had been charged on the in-app purchase.

Xyrality initially treated itself as the supplier of the apps to end users, charging German VAT to consumers. However, in 2016, Xyrality submitted corrected VAT returns to the German tax authorities for the years 2012-2014 in which it declared that the services actually fell within the scope of Article 28 and that the supplier of the apps to end users had been X. Therefore, Xyrality argued, the place of supply of Xyrality’s services should be Ireland as a business to business supply, taxable where X was established.

The German tax authorities issued a decision disregarding the corrections. This was appealed by Xyrality and its appeal was upheld by the Hamburg Finance Court, Germany. The German tax authorities appealed this decision, resulting in the referral of three questions to the CJEU:

• Should the supply of in-app purchases fall within Article 28?
• If so, should the place of supply of Xyrality’s supply to X be determined based on Article 44 or Article 45 of the EU VAT Directive?
• If as a result of the two proceeding questions Xyrality has not made a supply subject to German VAT, does it remain subject to a German VAT liability under Article 203 of the EUVAT Directive, which states that “VAT shall be payable by any person who enters the VAT on an invoice” on the basis that it was named as supplier and German VAT was shown on the order confirmations issued to end users?

The Advocate General (AG) delivered an opinion in the case in April 2025, giving the view that the in-app purchases were entirely dependent on, and additional to, the main service of making the app available; and these two elements form a single supply of services. The AG concluded that Article 28 was applicable to this service and, as a result, X took part in the supply and bought-in and onwards supplied the apps and in-app purchases to end users in its own name. Essentially, the AG’s view is that Article 28 should apply, where the conditions for Article 9a to apply are met by the principal, even for periods prior to 1 January 2015, thereby taking into account that Article 9a merely clarifies the application of Article 28 to digital services.

Decision of the CJEU

On 9 October 2025, the CJEU delivered its judgment in the case.

With respect to the first question, related to whether Article 28 should apply to the supply of in-app purchases by Xyrality in this case, that Article 28 cannot be precluded from applying to the sale of in-app purchases solely on the grounds that order confirmations provided to end customers by the app store (i) indicated that Xyrality was the supplier; and (ii) charged German VAT in line with Xyrality being established in Germany.

However, the CJEU have left the decision as to whether Article 28 is actually applicable to the supply of in-app purchases in this case to the referring court, noting that all the circumstances of the case should be taken into account and in particular the nature of the contractual obligations of the app store to its customers.

In responding to the second question, the CJEU confirmed that Article 28 creates a legal fiction where the principal in a supply of services is deemed to make a supply to an intermediary which is itself deemed to make an onwards supply to the end user. As Article 28 does not derogate from the normal place of supply rules, the place of supply of those deemed transactions should be determined in accordance with those normal rules, meaning that the place of supply between the principal and the intermediary (two taxable persons) must be determined in accordance with Article 44 of the EU VAT Directive.

Finally, in its response to the third question the CJEU focused on the overarching aim of Article 203 to eliminate the risk of tax loss where VAT has been invoiced incorrectly but the recipient has a right to recover that VAT charged to it. Taking this into account, the CJEU concluded that Article 203 could not be applied to impose a German VAT liability on Xyrality in a scenario where its supplies of in-app purchases were outside the scope of German VAT, but there was not risk of tax loss considering that all buyers in the case at hand would have been consumers.

Discussion and implications

The earlier AG’s Opinion had caught the eyes of taxpayers and advisers as it potentially opened the door for the CJEU to provide broad and novel guidance as to how Article 28 should be interpreted and how a single supply of digital services could possibly encompass later services not yet performed. For example, the AG’s view was that the in-app purchases in this case were entirely dependent on, and additional to, the main service of making the app available; and these two elements form a single supply of services, despite the end user paying no consideration for the initial download. In the end; however, the CJEU’s judgment did not go as far as the AG’s Opinion and instead stuck largely to reaffirming principles derived from earlier case law on the interpretation of Article 28. Notably, the CJEU relied heavily on its earlier decision in Fenix, giving further weight to the principles set out that case.

Ultimately the key takeaway from the judgment is that any assessment as to whether a supply falls within the scope of Article 28 should be driven by the facts including, importantly, the contractual relationship between the intermediary and the end customer.

We discuss additional takeaways from what is said (and what is not said) in the CJEU judgment in Xyrality below.

Further clarification as to how Article 28 should be interpreted following the introduction of Article 9a

The CJEU reaffirmed the position previously set out in Fenix that:

• Article 28 is drafted in general terms without any restriction to its scope. It therefore covers all types of services, including electronically supplied services such as those explicitly covered by Article 9a [paragraph 35 of the judgment]; and
• Article 9a cannot be regarded as supplementing or amending Article 28. Although Article 9a was not in force during the relevant period covered by the judgment, to the extent Article 9a clarifies the meaning of Article 28, those clarifications should be treated as having always had effect to Article 28 [paragraphs 42 and 43 of the judgment]. While this represents a useful clarification, the likelihood is that (subject to ongoing challenges or audits), all periods period to the introduction of Article 9a are now out of time and so cannot be subject to challenge.

Article 9a confined to electronically supplied services

Article 9a introduced, with respect to services supplied electronically through a telecommunications network, an interface or a portal, such as a marketplace for applications, a presumption that the marketplace operator is acting in his own name but on behalf of another person. This presumption may be rebutted subject to meeting certain conditions. However, if the marketplace authorises the charge to the customer or the delivery of the services, or sets the general terms and conditions of the supply, they shall not be permitted to rebut, i.e., avoid liability under Article 28 even if they explicitly indicate in the terms/order confirmation that the principal is the supplier of the service.

The drafting of Article 9a specifically refers to electronically supplied services made through an online interface. For the time being, the CJEU (and the AG) appear to accept this, referring to Article 9a only in the context of an electronic supply [paragraph 42 of the judgment, for example]. However, the CJEU is clear that any assessment as to the application of Article 28 should be undertaken based on all the facts at hand. It can therefore not be ruled out that a tax authority or court may use the fact that an intermediary sets the general terms of a supply, for example, as a factor that indicates that the intermediary is acting as the supplier of a service, even if that service is not an electronically supplied service made through an online interface.

Specific considerations for in-app purchases that are not covered by the judgment

The judgment does not opine as to whether the initial act of making an app available free of charge is part of the same service as the supply of the in-app purchase. Although the AG had set out their view that these two transactions were part of a single supply of services, the CJEU’s judgment does not touch upon this topic. It is questionable whether the AG’s logic could apply in circumstances where, unlike in Xyrality itself, the in-app purchase does not take place on the marketplace infrastructure but on the app’s own interface, using a third party payment provider in circumstances where the marketplace has no visibility as to the supply or its value.

Additionally, the judgment does not go as far as to say that whenever an app store sets the initial terms and conditions for a supply (e.g., such as when an end user is required to accept an app store’s general terms of use prior to downloading any apps), that app store is deemed to be the supplier of in-app purchases. Again, it appears that any analysis should go back to weighing up all the facts at hand and so, whilst this may be a factor that is taken into account when considering the application of Article 28 to any in-app purchase, it may not be determinative.