Online intermediaries: German Federal Fiscal Court on their distinction from businesses operating on their own account

Setting prices and handling payments for itself does not automatically make an online intermediary the provider of the service it brokers. The German Federal Fiscal Court (BFH) makes this clear in its judgment of 21 May 2026 (V R 17/24): As a general rule the contractual agreements are decisive for distinguishing for the purposes of value added tax between intermediary services and businesses operating on their own account, provided that they accurately reflect the actual economic circumstances.

Whether a transaction is an intermediary service or on one's own account determines the VAT implications

Online platforms are often not limited to merely acting as intermediaries between suppliers and customers. The more they are involved in pricing and payment processing, the more attention should be paid to distinguishing for value-added-tax purposes between an intermediary and a business operating on its own account.

In its judgment the German Federal Fiscal Court has set out important guidelines on this matter. The key issues are the significance of the contractual agreements and the conditions under which an intermediary service can still be assumed regardless of how heavily involved the platform operator is.

The contractual service relationships are the starting point

A claimant with its registered office outside the European Union operated an online portal for arranging car hire. Customers would select an offer on the site, pay the total price to the claimant and receive a voucher with which they could collect the vehicle at a later date. A framework agreement concluded with a domestic car hire company also provided for certain minimum and maximum volumes. The agreement stipulated that the claimant was to act solely as an intermediary and that the actual hire contract would only be concluded between the customer and the car hire company. Nevertheless the tax office and Cologne Fiscal Court assumed that this was a disguised transaction on the claimant's own account. In their view the claimant first took out the hire service from the car hire company itself and subsequently passed it on to the customer.

The German Federal Fiscal Court did not accept this interpretation. In its view the decisive factor in determining who is the supplier is generally the contractual legal relationships. These usually reflect economic and commercial reality, thus providing legal certainty. A different rule would apply only if the contractual arrangements did not accurately reflect the actual economic circumstances.

Setting your own prices and processing your own payments does not automatically mean that a transaction is on your own account

In the German Federal Fiscal Court's view the manner in which the business presented itself to customers was a key factor in indicating that it was providing an agency service. It was apparent to an average consumer that the claimant was merely acting as an intermediary for the hire service and that the actual hire contract would be directly with the car hire company.

The claimant's extensive economic involvement did not change this. It may have received the total price, set its own mark-up and simply passed on the agreed net rate to the car hire company, and the framework agreement may have also provided for specific hire volumes, but in the opinion of the German Federal Fiscal Court this was not sufficient to conclude that the claimant was providing a hire service on its own account.

The key factor was in particular that the claimant had not hired the vehicles itself. The agreed hire volumes merely set out the framework for the intended intermediary arrangements. The German Federal Fiscal Court therefore classified the activity as an intermediary service provided to the domestic car hire company. The latter was liable for value added tax on this transaction pursuant to section 13b German Value Added Tax Act (UStG).

How does the German Federal Fiscal Court's judgment fit into existing case law?

The decision is consistent with previous case law from the German Federal Fiscal Court. In its judgment of 10 August 2016 (V R 4/16) the German Federal Fiscal Court had already emphasised that the distinction between intermediaries and business operating on their own account depends in particular on the contractual relationships and the manner in which the business presents itself to the end customer. The current case also highlights an important distinction: Unlike in the previous proceedings, the claimant had not in fact first hired the vehicles on its own account. An intermediary clause alone is therefore unlikely to suffice if the purported intermediary first procures the underlying service for itself for commercial purposes and subsequently resells it.

Contract drafting is becoming increasingly important for online intermediaries

The judgment establishes greater legal certainty for platform operators. Though designation as an "intermediary" is not enough to determine the value-added-tax classification, where the terms of the contract match the actual performance, the contractual relationships regarding the services provided are the crucial starting point.

Companies should therefore take particular care to ensure that contracts, general terms and conditions, booking processes and external communications with end customers convey a consistent picture of the service relationships. Payment processing, pricing and agreed minimum volumes should also be reviewed to ensure that they are consistent with the intended role as an intermediary.

Correct classification is of considerable practical importance. It not only affects who provides the service in question and is liable for value added tax; it may also affect the place of performance and input tax relief.