VAT for Brokered Internet Service Providers

Is a company that is located abroad and is only brokering services and products for another company,  subject to German VAT? The BFH published its opinion in its verdict of May, 15, 2012 (re XI R 16/10, published on November 7, 2012).


A GmbH & Co. KG (KG) operates the website "" and enabled its visitors to view pictures and videos for a fee via a pass through link. It collaborated with a Spanish company that provided a web dialer and was remunerated for its services via the visitors’ phone bill. The company, after deducting its commission, forwarded the remuneration without invoicing VAT to the KG. The KG treated this turnover as VAT free. The tax office however opposed this approached and assessed the turnover with VAT.

The Federal Tax Court held that the company is an entrepreneur in terms of VAT law, because the company renders the service of a platform for downloadable content – regardless of how it is structured technically. The situation is comparable to a vendor selling goods in his shop. The vendor does not necessarily have to manufacture his sales items. The customer intends to buy from the shop owner and not anybody else. The same goes when dialing a toll number to download an electronic product, or render a service. The exposure determines the relationship. If a person overtly acts like an entrepreneur in the understanding of the law, the turnover is subject to VAT. This is true for all cases with secret agency.

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