THE HAGUE, Netherlands (CN) — The European Court of Justice on Tuesday upheld a tax regulation allowing United Kingdom authorities to charge London-based OnlyFans tax on all of its revenue, rather than only profit, in what is likely the last decision stemming from a case referred by the U.K. to the Luxembourg court before Brexit.
The European Union’s top court was unpersuaded by arguments from Fenix International, the content-subscription service’s parent company, that the British tax office overstepped its authority when it sought to collect four years of back taxes in July 2020, amounting to 11.2 million pounds ($13.5 million).
A British tax chamber tribunal referred the challenge by OnlyFans against His Majesty's Revenue and Customs assessment to the European Court of Justice, seeking clarification as to whether EU tax law gives the platform discretion in what it collects value-added tax on. The VAT is the EU-wide equivalent to a sales tax and is charged on most goods and services across the 27 member states.
Tuesday's ruling describes OnlyFans as a paid platform where a “creator has a ‘profile’ to which he or she uploads and publishes content, such as photos, videos and messages.” The site is primarily used by sex workers to share adult photos.
The company, which booked profits of $433 million in 2021, argued it was obligated to pay VAT only on the 30% it keeps as a service fee.
The court ruled that because OnlyFans sets the conditions by which creators use the platform, the company is considered the “supplier of the service” under the EU's 2013 VAT Directive. It "cannot evade [its obligations] by contractually designating another taxable person as the supplier of the services concerned,” the 17-judge panel wrote.
The decision echoes an opinion from a court adviser last September. Advocate General Athanasios Rantos wrote in his nonbinding opinion that EU tax rules require platforms that act as financial intermediaries to pay VAT on the entire amount they take in.
The case could bring to a climax the relationship between the European Court of Justice and the U.K. The British court sent the referral in this case to the EU's high court on Dec. 22, 2020, just days before the U.K. officially cut economics ties with the EU.
Britain's breakup from the political and economic union has been thorny. Only on Tuesday did the EU and the U.K. finally agree to a new trade deal over Northern Ireland, the northern portion of the island of Ireland which remains part of the U.K. Keeping the border open is considered to be an integral part of peace agreements that ended decades of sectarian violence.
According to the EU court, there could be some avenues for U.K. courts to continue to ask it for clarification regarding certain aspects of the separation agreements.
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