1 Background
If an app store is involved in the provision of a supply of services and acts in its own name and for the account of the app developer, VAT law provides for a supply chain (sec. 3 para. 11 of the German VAT Act / Art. 28 of the VAT Directive). For VAT purposes, the app store is then treated as if it were purchasing and reselling the supply of services itself. Effective as from 1 January 2015, this provision was specified, in accordance with Art. 9a VAT of the Council Implementing Regulation, for supplies of electronic services such that the supply chain is deemed to exist in certain constellations, regardless of whether the app store acts in its own name and for the account of another (see KMLZ VAT Newsletter 33 I 2025).
2 Reference procedure in Case C-101/24 – Xyrality
However, the German reference for a preliminary ruling in Case C-101/24 – Xyrality still concerns the legal situation prior to 1 January 2015. The Federal Fiscal Court (BFH) referred, amongst other things, the following questions to the ECJ: whether a supply chain, within the meaning of Art. 28 of the EU VAT Directive, exists in the case of so-called in-app purchases, and whether the order confirmations issued by the app store, on behalf of the app developers, give rise to a VAT liability for unduly charged VAT in accordance with sec. 14c of the German VAT Act / Art. 203 of the EU VAT Directive.
The ECJ affirmed the existence of a supply chain under Art. 28 of the EU VAT Directive. The app store acts in its own name with regard to in-app purchases. The fact that the app store acts in the name of a third party is not evident from the order confirmations, which bear the name of the app developer. This is because these order confirmations are inevitably only issued after the purchase transaction has been completed (see KMLZ VAT Newsletter 36 I 2025).
The ECJ only had to rule on the case where order confirmations were issued exclusively to non-taxable persons. For this reason, it ruled out a VAT liability for unduly charged VAT in accordance with sec. 14c of the German VAT Act / Art. 203 of the EU VAT Directive and was also able to leave open the question of whether the order confirmations even constitute VAT invoices at all (see KMLZ VAT Newsletter 36 I 2025).
3 Referral back by the Federal Fiscal Court, judgment of 26.03.2026 – V R 46/25 (XI R 10/20)
Despite this seemingly clear ruling by the ECJ, the Federal Fiscal Court considers the tax office’s appeal to have merit and has referred the case back to the Fiscal Court. This is because the Federal Fiscal Court does not entirely rule out a VAT liability for unduly charged VAT for the app developer in Germany. In the present case, this may arise from sec. 14c of the German VAT Act / Art. 203 of the VAT Directive. This would be the case if the order confirmations contain the mandatory invoice requirements, within the meaning of sec. 14c of the German VAT Act, and were also issued to taxable persons. However, no findings have been made on these issues in the proceedings to date, which must now be addressed by the Fiscal Court as the court of facts. In this context, the Federal Fiscal Court confirms that a VAT liability, arising in accordance with sec. 14c of the German VAT Act, does not arise where invoices are issued exclusively to end consumers.
4 Practical implications
It is very welcome that the Federal Fiscal Court has now, once again, confirmed that invoices issued to non-taxable persons cannot give rise to a VAT liability for unduly charged VAT under sec. 14c of the German VAT Act / Art. 203 of the EU VAT Directive. This decision has significant practical relevance, even beyond the confines of the platform economy.
The crucial question, in the present case, is now whether the order confirmations for in-app purchases were issued exclusively to non-taxable persons. However, this question is likely to be very difficult to answer with regard to the past, so a reasonable estimate will probably have to be made here. It is certainly true that the proportion of taxable persons in in-app purchases is likely to be rather low. However, this cannot be said with certainty for this business model either. The background is that supplies in this business model (eg through in-app purchases or online video game skins) are growing rapidly. Consequently, (supposedly) private gamers and streamers regularly cross the threshold to become, from a VAT perspective, taxable persons.
The distinctive feature in this case is that, although the App Store itself makes payments to the customer, due to the VAT fiction in accordance with sec. 3 para. 11 of the German VAT Act, it issues the order confirmations in the name of the app developer. This circumstance may now pose a risk to app developers, provided that the order confirmations contain the mandatory invoice requirements within the meaning of sec. 14c of the German VAT Act. App developers should take this as an opportunity to review their invoices – regardless of whether they issued these invoices themselves or the invoices were issued by an app store on their behalf.
