LUXEMBOURG (CN) — OnlyFans should be paying value-added tax on the entire amount paid by subscribers, not just on the amount it collects for itself, an adviser to the EU's highest court said Thursday.
Through its parent company, Fenix International, the London-based OnlyFans is seeking relief after Britain's version of the IRS, known as Her Majesty's Revenue and Customs, sought to collect four years of back taxes in July 2020, amounting to 11.2 million pounds ($12.9 million).
Since its founding in 2016, OnlyFans has been primarily used by sex workers to share adult photos. More than 2 million creators post content to the platform, which collects money from some 220 million subscribers.
The company, which had profits of $433 million in 2021, argued it was obligated to pay VAT only on the 20% it keeps as a service fee.
Britain's First-tier Tribunal (Tax Chamber) referred the challenge by OnlyFans to the European Court of Justice, seeking clarification as to whether EU tax law gives the platform discretion in what it collects VAT on. Although the United Kingdom left the European Union in 2020, cases pending before the Court of Justice continue to be adjudicated.
Advocate General Athanasios Rantos determined in his nonbinding opinion Thursday that European Union tax rules require platforms that act as financial intermediaries to pay VAT on the entire amount they take.
Under the 2013 VAT Directive, Rantos said, companies like OnlyFans are required to pay VAT on the full revenue they book. The directive doesn’t contain “restrictions as to its scope or its extent,” the Greek judge wrote.
OnlyFans took off during the pandemic and announced earlier this month that it had collected more than $4 billion in subscription fees. Users can subscribe to their favorite creators on an ongoing monthly basis, as well as offering tips. “We are empowering creators to monetize their material and have true control over it,” company CEO Amrapali Gan said in a statement.
According to the company’s own tax advice, OnlyFans will collect all applicable VAT for creators located outside of the EU and the U.K. The website notes that creators in the EU should indicate on their tax filings that their income is VAT exempt. For creators residing in the United Kingdom, their obligation depends on their personal tax status.
Final judgments from the court follow the legal reasoning of their advocates general in about 80% of cases, and a ruling is expected by the end of the year.Follow @mollyquell
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