Taxation of the Platform Economy: Challenges and Lessons for Social
(forthcoming in Social Law 4.0: New Approaches for Ensuring Financing Social
Security in the Digital Age, U. Becker and O. Chesalina (Eds.), Nomos
II. Platform-Related Issues and International Initiatives
1. Relationship of Platform and Work Status
2. Labour-Related Tax Incentives for Platforms
III. Tax Issues and Employment Relationship: National Responses
IV. What can we Learn from Taxation?
1. Double Tax Treaties and the OECD MC
2. Can VAT Provisions be of any Help?
a) Carrying Out Activities “Independently”
b) Taxable Person
c) Economic Activity/ Income Definition
3. Enforcement and Collection
This contribution aims to shed some light on issues arising from the taxation of the
platform economy. While it is rather obvious that the purposes of labour law,
social security law and tax law differ, this chapter will attempt to answer the
question whether any lessons can be learned for social law from the treatment of
platforms and platform workers in tax law.
The digital economy encompasses various different business models mediating
technology in multi-sided markets (such as social networks, online marketplaces,
and sharing economy platforms) and highly specialised services in single-sided
markets (for example, cloud computing, diagnostics, etc.).
The platform economy
constitutes a sub-area of the digital economy. Variously called the platform,
sharing, collaborative, gig or “peer-to-peer” (P2P) economy, and sometimes
described as collaborative consumption or crowd-based capitalism,
intend to describe an economic model in which individuals are able to borrow or
rent assets owned by someone else.
As will be discussed, tax law, both at an international and EU level, has focused
mostly on how to ensure that the profits of the platforms are taxed where they
Similarly, it is the taxation of the digital economy, and not the sub-area of
the platform economy, that is in the spotlight in the discussions of policy makers.
These two facts taken together have contributed to the absence of clear proposals
as to the taxation of the platform economy, and more specifically the taxation of
“platform workers”. While some discussion at policy level has been initiated
the approaches and solutions rest with individual countries and are very
far from being coordinated.
The present chapter will provide an account of the main problems arising from a
tax law perspective in the taxation of platform workers, it will highlight the
importance (or lack thereof) of the taxation of the platform, and will examine some
solutions put forward in different jurisdictions. It will conclude by attempting to
answer whether there is anything for social law to learn from tax law and whether
taxation, one of the main sources of financing social protection, is adequately
prepared to deal with the platform economy challenges.
Kofler, Georg/Mayer, Gunter/Schlager, Christoph, Taxation of the Digital Economy: A
Pragmatic Approach to Short-Term Measures, in: European Taxation, 58 (2018) 4, p. 123.
This term was coined by Sundararajan, Arun, The Sharing Economy: The End of Employment
and the Rise of Crowd-Based Capitalism, Cambridge: MIT Press 2016, p. 27.
Schneider, Henrique, Creative Destruction and the Sharing Economy: Uber as Disruptive
Innovation, Cheltenham: Edward Elgar Publishing 2018, p. 6. Throughout this chapter, these
terms, and in particular the terms “sharing economy” and “platform economy” are used
The place of the taxation of these profits is a debatable issue in taxation. Several concepts have
been put forward to substitute the required physical presence of the platform as a nexus for
taxing. One of those is “value creation”.
See for instance Milanez, Anna/Bratta, Barbara, Taxation and the Future of Work: How Tax
Systems Influence Choice of Employment Form, in: OECD Taxation Working Papers, 41
II. Platform-Related Issues and International Initiatives
Despite the challenges it poses, the taxation of the platform economy has received
little attention in the recent EU and international proposals that focus primarily on
the taxation of the digital economy. The recent proposals aim to find ways to tax
the big multinational corporations operating in the digital economy, like Facebook
which are usually taxed in their place of residence (which is often the
US) yet escape taxation in other places where they create profits. It is obvious that
the potential of taxing Facebook in other states on the basis, for instance, of its
number of users there will bring much more revenue to those states, as opposed to
the taxation of the “platform workers”.
Placing this in the context of the platform economy, it comes as no surprise that
both the OECD and the EU focus on how they can tax the profits of Airbnb and
Uber instead of the Airbnb host and the Uber driver.
Consequently, it is the
taxation of the platform itself that has attracted the focus of international proposals
and recommendations, and notably the question where to tax the profits of the
platforms operating in the digital economy, in absence of a physical presence in the
countries where they operate.
But even in this case, a uniform definition of a
platform does not exist, as each one of them employs different business models.
The question is not merely rhetorical as one common definition encompassing a
number of those models would allow for a common tax treatment of the different
platforms and platform workers.
Note, for instance, the GAFA tax (Google, Apple, Facebook and Amazon) adopted in France in
July 2019, which imposes a 3% levy on the total annual revenues of the largest technology firms
providing services to French consumers.
The different proposals are discussed in the last sections. Among the different solutions put
forward is the suggestion to tax the platform’s profits where “value is created”, that is where the
profits arise and where the service is provided, instead of the place of the tax residence of the
See for instance, OECD, Tax Challenges Arising from Digitalisation – Interim Report 2018:
Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, Paris:
OECD Publishing 2018, (hereinafter “2018 OECD Interim Report”) p. 196,
http://dx.doi.org/10.1787/9789264293083-en; European Commission, Proposal for a Council
Directive laying down rules relating to the corporate taxation of a significant digital presence,
COM (2018) 147 final (hereinafter “2018 SDP Directive Proposal”).
Pantazatou, Katerina, The Taxation of the Sharing Economy, in: Haslehner, Werner/Kofler,
Georg/Pantazatou, Katerina/Rust, Alexander (eds.), Tax and the Digital Economy: Challenges
and Proposals for Reform, Alphen aan den Rijn: Wolters Kluwer 2019, pp. 215-236, at 217.
EU and international initiatives have focused on how to allow Member States (or
third countries) to tax the profits of companies that have no physical presence in
the respective country; yet, they certainly contribute to value creation. By allowing
for the fiction of the “digital presence” or “significant economic presence
evidenced via digital technology and other automated means”
and by ensuring
that taxation will arise wherever a Multinational Enterprise (MNE) has a “virtual
the recent proposals aimed to thwart the outdated idea
that an enterprise needs to be physically present in a country to supply goods or
services in that market. However, the proposals as to how to best tackle this issue
were many, each one of them coming with its own set of problems, such as the
allocation of profits across countries.
In 2018, the Commission followed the
OECD’s initiatives and published proposals for two Council Directives on the
taxation of the digital economy
and one (non-binding) Commission
Recommendation relating to the corporate taxation of a significant digital presence
These proposals have now been put “on hold” in favour of the OECD’s
suggested “Unified Approach”.
In 2019, the OECD attempted to find the
commonalities among the different proposals and agree on a “Unified Approach”
towards the tax challenges raised by the digitalisation of the economy.
OECD, Addressing the Tax Challenges of the Digitalisation of the Economy. Public
Consultation Document. 13 February – 6 March 2019, https://www.oecd.org/tax/beps/public-
Accessed 10 July 2020.
OECD, 2018 OECD Interim Report, p. 160 (see fn. 8). [I think the footnote is right, I am
referring in ft 8 on the ‘2018 OECD Interim Report’
These proposals included the “user participation”, “marketing intangibles”, and “significant
economic presence” proposals.
European Commission, Proposal for a Council Directive on the common system of a digital
services tax on revenues resulting from the provision of certain digital services, COM (2018) 148
final as well as 2018 SDP Directive Proposal (see fn. 8).
European Commission, European Commission Recommendation of 21 March 2018 relating to
the corporate taxation of a significant digital presence, COM (2018) 1650 final.
OECD, Statement by the OECD/G20 Inclusive Framework on BEPS on the Two-Pillar
Approach to Address the Tax Challenges Arising from the Digitalisation of the Economy,
January 2020, https://www.oecd.org/tax/beps/statement-by-the-oecd-g20-inclusive-framework-
on-beps-january-2020.pdf. Accessed 10 June 2020.
OECD, Public Consultation Document: Secretariat Proposal for a “Unified Approach” under
Pillar One, November 2019, p. 4, https://www.oecd.org/tax/beps/public-consultation-document-
secretariat-proposal-unified-approach-pillar-one.pdf. Accessed 10 July 2020.
In January 2020, the OECD came up with a new proposal on a “Unified
Approach” hoping that consensus will be reached among the participating
countries regarding the best way to address the challenges arising from the taxation
of the digital economy.
The proposal focused on the taxation of the platforms and
advocated, inter alia, the creation of a new nexus for the taxation of the platforms’
profits, not dependent on physical presence but largely based on sales, a profit
allocation rule and mechanisms to ensure greater legal certainty.
While the aforementioned reports and proposals have been inadequate in tackling
the taxation of the platform workers, the 2018 OECD Interim Report
acknowledged that the focus, with regard to the sharing economy, should be placed
on the contractual relationship between the platforms and the service providers, as
the grey zones that can be found therein could lead to a minimisation of both tax
liability and the tax base.
In the context of the platform economy, focusing on the
platform worker would indeed make sense, as on average, the “service provider”
rather than the platform receives over 85% of the transaction value.
Nevertheless, as the sections below will show, the platform and its taxation does
play a role in the taxation of the platform workers. One way this may happen is
through its classification and placement in the appropriate legal and regulatory
environment, which, in turn, may affect the employment relationship between the
platform and the platform workers and, thus, their taxation. Another way is by
providing tax incentives to the platform to create or opt for a particular work status
of its workers (whether this is an employment status or an independent contractor’s
status). I now turn to explore these two possibilities.
1. Relationship of Platform and Work Status
OECD, Statement by the OECD/G20 Inclusive Framework on BEPS on the Two-Pillar
Approach to Address the Tax Challenges Arising from the Digitalisation of the Economy (see fn.
OECD, 2018 OECD Interim Report (see fn. 8).
Elliot, Carrie Brandon, Taxation of the Sharing Economy: Recurring Issues, in: Bulletin for
International Taxation 72 (2018) 1: Platform revenue models vary significantly, even within the
same commercial sector, but most adopt a fixed or variable commission approach, with
commissions ranging from 1% to 2% of transaction value for crowdlending, to as high as 20%
This section will attempt to explain how the classification of the platform may
influence the work status of “gig workers” and, in turn, their taxation. As will be
argued, the “worker classification” question relates (also) to the classification of
the platform. An Uber driver does not necessarily need to be classified for tax
purposes in the same way as an Airbnb host or a “BlaBlaCar” driver. The
classification, for example, of an Uber driver as an independent contractor, a
worker or an employee, cannot be considered independently of the classification of
the platform and the nature of the services it requires.
Consequently, one would
have to start by understanding and classifying the services provided by the
platforms in the sharing economy, in an attempt to understand the legal
relationship between the platform workers and the platform. Two recent CJEU
Grand Chamber non-tax-related judgments aimed to shed some light on this
problem, examining, inter alia, the types of services provided by the two “flagship”
platforms in the sharing economy, Uber and Airbnb.
The CJEU dealt first with the Uber case,
where it found Uber to be a
transportation service provider, instead of a digital platform, as the intermediation
service provided by the platform was inherently linked to a transport service.
its recent case Grand Chamber Airbnb Ireland
the CJEU emphasised that Airbnb
was different from Uber. In contrast to Uber, the services provided by Airbnb
could be classified as “information society services” within the meaning of
Directive 2000/31. In reaching this conclusion, the CJEU considered that even
though “the purpose of the intermediation service provided by Airbnb Ireland is to
enable the renting of accommodation […] the nature of the links between those
ECJ of 20 December 2017, Case C-434/15, Asociación Profesional Elite Taxi,
Ibid., para. 48: The services Uber provides “[…] must be interpreted as meaning that an
intermediation service such as that at issue in the main proceedings, the purpose of which is to
connect, by means of a smartphone application and for remuneration, non-professional drivers
using their own vehicle with persons who wish to make urban journeys, must be regarded as
being inherently linked to a transport service and, accordingly, must be classified as “a service in
the field of transport” within the meaning of Article 58(1) TFEU. Consequently, such a service
must be excluded from the scope of Article 56 TFEU, Directive 2006/123 and Directive
ECJ of 19 December 2019, Case C-390/18, Airbnb Ireland, EU:C:2019:1112.
services does not justify departing from the classification of that intermediation
service as an ‘information society service’ and therefore the application of
Directive 2000/31 to it.”
However, in the Court’s view and unlike its judgment in
Uber, in this case, the intermediation service is so strong and essential that it
“cannot be separated from the property transaction itself, in that it is intended not
only to provide an immediate accommodation service, but also […] to provide a
tool to facilitate the conclusion of contracts concerning future interactions. It is the
creation of such a list for the benefit both of the hosts who have accommodation to
rent and persons looking for that type of accommodation which constitutes the
essential feature of the electronic platform managed by Airbnb Ireland.” (emphasis
In reaching this conclusion the Court considered the essential features of each
platform, the indispensability of the platform in the delivery of the underlying
service as well as the setting or the “capping” of the price to be charged to the
guests. Under all these criteria, the Court found that Uber and Airbnb were
The question of the services (and their ancillary or essential character) provided by
each platform is fundamental in the assessment of the taxation of both the platform
and the Uber driver or the Airbnb host. With regard to the former point, the nature
of the services provided by the platform is relevant for the assessment of the VAT
to be paid, notably the definition of the place of supply of the service, which
decides, inter alia, where the VAT will be paid. This concerns both the B2B
relationship between the platform and the “supplier”/platform worker as well as the
B2C relationship between the platform and the consumer. In turn, the place of
supply of the service at issue “to a taxable person acting as such shall be the place
Ibid., para. 52.
Ibid., para. 53.
For more on the comparison of the two cases see Beretta, Giorgio, Airbnb is Not Uber: VAT
Reflections on the Airbnb Ireland Case (C-390/18), Blogpost on LinkedIn, 22 December 2019,
beretta/. Accessed 10 July 2020; and Loquet, Erwan/Karoutis, Dimitrios, European Union –
VAT Considerations on ECJ’s Ruling that Airbnb is Not a Real Estate Agent, in: International
VAT Monitor, 31 (2020) 4.
where that person has established his business.”
For instance, if the service at
issue were to be classified as a transport service, then the place of supply (and the
place where VAT would be payable) would be where the transportation takes
place, pursuant to Article 48 of the VAT Directive.
With regard to the second ramification, the legal framework to which the platform
is subject will be defined by its classification. In other words, if Uber is classified
as (mainly) a transportation service, then it will be subject to the transport policy-
related directives. This categorisation may inform other important features in the
systematisation of the work status of the “service-providers” on the platform, such
as control (i.e. ensuring that the requisite standards of safety and quality are met)
or the influence the employer has to exercise over the service-provider and the
quality of the services (s)he provides.
2. Labour-Related Tax Incentives for Platforms
When looking into the platform economy, one should not overlook that, in general,
brick and mortar companies tend to opt for contracting self-employed workers
instead of hiring standard employees, because they face lower tax burdens per
worker hired. Indeed, tax incentives may play an important role in platforms’
preferences as to what kind of contracts they would like to conclude with their
Article 44, Directive 2006/112/EC on the common system of value added tax (6th Recast VAT
Directive). On the definition of the taxable person, see infra, under IV. 2. B.
See Beretta, Giorgio, Airbnb is Not Uber: VAT Reflections on the Airbnb Ireland Case (C-
390/18) (see fn. 27).
Indeed, the degree of the influence and control of the platform to the “service providers” was
decisive in their classification as an “information society services” platform for Airbnb and as a
transportation services platform for Uber. In the words of Advocate General Spzunar: “It should
be noted, in that regard, that Uber exercised control over the quality of the vehicles and their
drivers and also over the drivers’ conduct by reference to the standards that Uber itself had
determined. On the other hand, as is apparent from points 27 and 29 of this Opinion, the control
exercised by Airbnb Ireland concerns users’ compliance with standards defined or, at the very
least, chosen by those users. In any event, as regards Uber’s activity, the exercise of the power of
administrative control was only one of the factors that led to the assertion that that provider
exercised decisive influence over the conditions under which the transport services were
provided.” See ECJ of 19 December 2019, Case C-390/18, Airbnb Ireland, EU:C:2019:1112,
workers. Besides not having to pay social security contributions for independent
contractors, tax incentives may consist of deductions from Corporate Income
Taxes (CIT) or the absence of the obligation to pay certain taxes (such as payroll
taxes), or reduced administrative costs for the platforms. Consequently, taxation
may be decisive for the preferences of the platforms as to the “work status” they
want their workers to have.
For instance, it has been reported that in the Netherlands, the tax cost of hiring an
independent contractor is 37% lower compared to the cost of hiring a standard
employee, reflecting substantial labour cost savings for firms.
This is because the
employer of an independent contractor is not liable for social contributions for the
worker. Similarly, the employer/platform can deduct from its corporate income
liability labour-related costs or make use of “labour-related” tax allowances and
credits against its total CIT liability.
These deductions and allowances obviously
vary from country to country and depend on the respective employment. For
instance, in Argentina, corporations (and platforms) are allowed to deduct from
their CIT base labour costs, including wages, employer social security
contributions and employee non-tax compulsory payments (NTCPs) for standard
In contrast, in Italy, according to the OECD Working
Paper, firms are able to deduct the overall employment cost (gross wage plus
profits) both when computing the CIT and the IRAP, also when they “employ”
In the same vein, the contractors are entitled to make certain deductions, which
vary from country to country, from their income tax, lowering both their own tax
burden and their employer’s.
When firms/platforms can save a lot on tax-related
labour costs by hiring contractors, and when contractors are also in a tax-beneficial
Milanez, Anna, Gig Workers and the Tax Web, in: OECD Observer, 319 (2019) Q3,
Accessed 10 July 2020.
Such can be the case, for instance, when an employer hires a person with disabilities.
Milanez, Anna/ Bratta, Barbara, Annex – Taxation and the Future of Work: How Tax Systems
Influence Choice of Employment Form, in: OECD Taxation Working Paper Series, 42 (2019), p.
Ibidem, p. 66. Similarly, for the Netherlands, p. 79: “[E]mployer’s labour costs are deductible
from the CIT base, irrespective of the type of worker.”
Milanez, Anna, Gig Workers and the Tax Web (see fn. 31).
position if they are not classified as employees, it is obvious that the tax system at
issue promotes demand for independent work.
The recent OECD Working Paper highlights how tax systems may offer tax
incentives to both platforms and workers to distort the employment relationship.
Taking the Netherlands as one of the case studies, the OECD Working Paper
explains how the Dutch tax system entitles unincorporated self-employed workers
to two deductions from personal income tax allowing them to pay less tax than
Consequently, unincorporated self-employed workers have the lowest
payment wedge, both at the average wage but also across the wage spectrum.
Indeed, the degree of variation between payment wedges across different
employment forms is considerable among the countries studied in the OECD
As the authors note, in countries like Hungary, Italy, Sweden and
the United States the payment wedges are rather “clustered” reflecting little
incentive to shift between employment forms for tax reasons (individual or firm-
related), whereas in countries like the Netherlands and Argentina payment wedges
vary greatly, reflecting the opposite outcome.
In this latter scenario, “[t]his
translates into a tax system incentive for firms to contract labour rather than offer
standard employment contracts, potentially misclassifying workers in the process.
It also implies a tax system that incentivises individuals to become self-
III. Tax Issues and Employment Relationship: National Responses
Milanez, Anna/ Bratta, Barbara, Taxation and the Future of Work: How Tax Systems
influence Choice of Employment Form (see fn. 5).
Ibid., p. 60: “In summary, in the Netherlands, this analysis shows that the tax system provides
an incentive for a firm to hire an unincorporated self-employed worker, as by doing so it pays a
total employment cost of EUR 40,911 instead of EUR 64,960 for a standard employee or EUR
53,074 for an incorporated self-employed worker.”
Ibid. The paper defines the average compulsory payment wedge (“payment wedge”) as the net
amount that government receives as a result of taxing income from work, inclusive of social
contributions (SSCs and NTCPs), over the total employment cost of the worker under
Ibid., pp. 55f.
Ibid., p. 66.
The classification of platform workers is crucial not only for social security
contribution purposes, but also for tax purposes. When someone qualifies as an
employee, it is the employer that has to withhold (at least part) of the taxes from
the employee’s salary. In contrast, when someone qualifies as self-employed or as
an independent contractor, he/she is responsible for declaring his/her income and
for paying taxes (and social security contributions) accordingly, saving the
company significant administrative costs. There are certainly variations with
regard to the applicable tax rates, the minimum taxable income, the deduction of
business expenses etc. Usually, in addition to paying income tax, a self-employed
person who provides some sort of services is liable to pay VAT.
Thus, the definition of the work status of the service providers/suppliers becomes
essential, equally for labour law, social law and tax law. Obviously, such a
universal or pan-European allocation of work status in the sharing economy or per
platform does not exist, not least because such rules do not even exist even for the
traditional forms of work. A lawyer, a plumber and an artist are taxed differently in
different countries, depending on how much they work, where they work, whether
this is their main or ancillary activity and considering many more factors. Equally,
this difference in taxation may be expressed via different applicable tax rates,
different tax bases (the income to be taxed) and as such, different allowances and
deductions. Things get even more complex when we consider a cross-border
scenario, even in the traditional (non-digital) understanding of work.
The context of the collaborative economy makes it even more difficult to answer
the crucial questions of who should pay/withhold taxes, where taxes should be paid
and what kind of taxes should be paid. There are several reasons for that; 1) the
uncertainty as to the qualification of the type of work performed. For instance, the
Uber driver may have a different status in different countries ranging from an
employee to an independent contractor. This classification affects not only the
direct taxes he will have to pay but also the requirement of VAT registration and
payment. Similarly, his status may change if he works for “BlaBlaCar”. 2) The
nature of services provided in the sharing economy and the lack of reporting
standards make it easier for the shadow economy and undeclared work to
3) The majority of platform workers work in at least one more job,
resulting in the fragmentation of their income.
For instance, someone may be
resident in France, rent out an apartment he has in Portugal via Airbnb and, at the
same time, provide online consultancy advice to a company in Belgium. In such a
multi-state scenario, it is possible that the person at issue does not even know
where to report the income he made from the use of different platforms.
A question that arises frequently is who has the final say in this classification.
There is no obvious or clear answer to this question that would allow for a coherent
legal framework. Reis and Chand provide for a good account of recent judgments
in different countries that found Uber drivers to be either employees or
independent contractors, considering a number of (similar) criteria.
For example, the UK employment tribunal dealt with a case about the employment
status of Uber drivers.
That tribunal was asked whether Uber drivers qualified as
self-employed/independent contractors or as employees/workers. In defining
whether Uber drivers should be treated as contractors, the tribunal looked into
whether income tax and UK national insurance were deducted from their pay.
Conversely, to determine their tax liability, the “tax test” would have had to look at
their holiday pay, sick pay and pension rights.
The UK employment tribunal
See for instance, OECD, Shining Light on the Shadow Economy: Opportunities and Threats,
2017, p. 19, https://www.oecd.org/tax/crime/shining-light-on-the-shadow-economy-
opportunities-and-threats.pdf. Accessed 10 July 2020; where one of the main issues tax-related to
the sharing economy was identified as: “since there is usually no traditional employer, payments
received will not generally be visible to the tax administrations in the way, for example, that they
are for salaried employees in many countries.” I will come back to this point in section IV. 3.
See for instance, OECD, Automation and Independent Work in a Digital Economy, Policy
Brief, May 2016, p. 4, https://www.oecd.org/els/emp/Policy%20brief%20-
Accessed 10 July 2020: “As workers in the “platform economy” are more likely to have multiple
jobs and income sources, the role and meaning of traditional labour market institutions are being
Reis, Ariene/Chand, Vikram, Uber Drivers: Employees or Independent Contractors?, in:
Kluwer International Tax Blog, 3 April 2020, http://kluwertaxblog.com/2020/04/03/uber-drivers-
contractors/?doing_wp_cron=1591797547.0120589733123779296875. Accessed 10 June 2020.
UK Employment Tribunal Judgement of 28 October 2016, Case No. 2202550/2015, Aslam
and Farrar and Others v. Uber BV, Uber London Ltd and Uber Britannia Ltd (hereinafter “UK
Sayliss, Leigh, Be Careful What You Wish for, in: Taxation, 178 (2016) 4579.
concluded that Uber’s drivers were to be classed as workers with access to
minimum wage, sick pay and paid holidays, although they treated themselves as
self-employed persons for tax purposes.
The decision was also upheld by the
Employment Appeal Tribunal
and the Court of Appeal.
The case highlights the distinction between labour law, social security
contributions and tax law in the sharing economy and raises the question of
whether there is a need to coordinate these interrelated policy areas. The 2018
OECD Interim Report identified this distinction as one of the thorniest issues in the
sharing economy context.
As different states provide for different tax incentives
or disincentives, depending on the type of labour contract at issue, sharing
economy features (and uncertainties) within the tax system could lead to tax
revenue losses if there are large shifts in working patterns and taxable status.
Another pertinent question is who decides on the qualification of the status of the
“worker”. For instance, the judgment of the UK employment tribunal seemed to
cross-cut between the tax treatment of Uber drivers, which is, in turn, informed by
the drivers’ access to certain social security benefits. In some countries, it appears
that “priority” is given to the designation made by the tax authorities and whether
the Uber driver, for instance, falls within the given tax definition.
The problem is
circular in that, if the definition is informed by, for instance, the access to social
security benefits, as happened in the Uber UK case, then the different criteria and
classifications may lead to contradictory results. What if, for example, one is
classified for tax purposes as an employee but his employer does not pay for social
security contributions? Which classification will take precedence and how will the
classification for labour law purposes be made?
UK Uber Case, para. 65 (see fn. 45).
UK Employment Appeal Tribunal Judgement of 10 November 2017, Appeal No.
UKEAT/0056/17/DA, Aslam and Farrar and Others v. Uber BV, Uber London Ltd and Uber
UK The Court of Appeal Judgement of 19 December 2018, Case No. A2/2017/3467, Aslam
and Farrar and Others v. Uber BV, Uber London Ltd and Uber Britannia LTD.
OECD, 2018 OECD Interim Report, p. 196 (see fn. 8).
Ibid., p. 196.
Such an example is Denmark.
In Switzerland, there seems to be general consensus that Uber drivers should be
classified as employees.
The French Cour de Cassation also agreed that Uber
drivers should be characterised as employees on the premise that they do not have
independence in fixing their price or building their clientele.
In the US, the classification of “gig workers” has created a lot of tension between
platforms and workers, upon the delivery of the famous judgment of the California
The judgment dealt with the applicable standards in determining
whether workers should be classified as employees or as independent contractors
for purposes of California Wage Orders.
Pursuant to the judgment that suggested
a new presumption that all workers be employees instead of contractors, unless the
employer proves otherwise under the newly adopted “ABC test”,
the State of
California approved, with effect from 1 January 2020, the California Assembly Bill
5 (“AB-5”) incorporating the “ABC test”.
Under this test, for a worker to be
classified as a contractor, the employer will have to prove that: (A) the worker is
free from the control and direction of the hiring entity in connection with the
performance of the work, both under the contract for the performance of the work
and in fact; (B) the worker performs work that is outside the usual course of the
hiring entity’s business; and (C) the worker is customarily engaged in an
independently established trade, occupation, or business of the same nature as the
work performed. The three criteria are cumulative, therefore, if one of the three
With regard to that see Reis/Chand (see fn. 44); the references made there to SUVA, SECO
and UNIA and judgments by domestic courts.
Arrêt n°374 du 4 mars 2020 (19-13.316), Cour de Cassation – Chambre Sociale,
https://www.courdecassation.fr/jurisprudence_2/chambre_sociale_576/374_4_44522.html, or in
English: https://www.courdecassation.fr/IMG/20200304_arret_uber_english.pdf. Both Accessed
15 May 2020.
Win, Suzin, The Bill That Disrupted the Gig Economy: AB-5 and Uber’s Troubling Response,
in: GGU Law Review Blog, 2 March 2020, https://ggulawreview.com/2020/03/02/the-bill-that-
disrupted-the-gig-economy-ab-5-and-ubers-troubling-response/. Accessed 10 June 2020.
Supreme Court of California Judgement of 30 April 2018, Dynamex Operations West, Inc. v.
Superior Court of Los Angeles, https://law.justia.com/cases/california/supreme-
court/2018/s222732.html. Accessed 10 June 2020.
For the text of the Bill, see California State Legislature, Worker Status: Employees and
Independent Contractors, 19.09.2019, https://leginfo.legislature.ca.gov/faces/billNavClient.
xhtml?bill_id=201920200AB5. Accessed 13 July 2020.
conditions is not met then an employment relationship between the employee and
the worker will be established.
As it appears very likely that an Uber driver (though not an Airbnb host) will not
meet the ABC test, and, hence, will be qualified as an employee, the Bill has
sparked reactions from Uber and like companies. In the fear that approximately
$500 million a year will be added to Uber’s labour costs and payroll taxes Uber
filed a lawsuit in federal court challenging the constitutionality of AB-5 and sent
an email to more than 150,000 California drivers and millions of passengers,
notifying a change in the way they conduct the service.
These changes consist in
giving more freedom to the drivers to select their passengers and destinations to
escape condition (A).
Despite these positive changes for gig workers at domestic or regional level,
several other institutions and organisations have classified Uber drivers as
Among the factors considered towards such a finding,
the control of the drivers over their workload (how much, how often, when they
can perform their work) was fundamental.
IV. What can we Learn from Taxation?
A common definition, or at least a common understanding of what constitutes an
employment relationship, would facilitate the taxation of “platform workers”. As
highlighted, however, such a definition is lacking across countries, or at a
Win, Suzin, The Bill That Disrupted the Gig Economy: AB-5 and Uber’s Troubling Response
(see fn. 55).
According to Reis and Chand, Uber Drivers: Employees or Independent Contractors? (see fn.
44) such examples include the District Court of Pennsylvania in the US, United States District
Court for the Eastern District of Pennsylvania, Ali Razak, Kenan Sabani and Khaldoun
Cherdoud v. Uber Technologies Inc., Civil Action n. 16-573, 11.4.2018; the State of Florida in
the US, Third District Court of Appeal of State of Florida, Darrin E. McGillis v. Uber, N. 3D15-
2758, Lower Tribunal N. 0026283468-02, 1.2.2017 and the Brazilian Superior Labour Court that
pronounced Uber drivers are contractors. In Australia in June 2019, the Fair Work Ombudsman
decided to qualify Uber drivers as independent contractors, https://www.fairwork.gov.au/about-
Accessed 10 June 2020.
supranational level, and even across inter-related sub-disciplines (labour law, tax
law, social security contributions). Given the importance of the classification of gig
workers either as employees or independent contractors, the lack of common
criteria and the complex legal relationships in the platform economy have led to
the paradoxical situation that one and the same person, the Uber driver for
instance, may for labour law purposes be classified as an independent contractor,
whereas for tax law and/or social security law purposes as an employee. The
situation is even more complex when driving the Uber car is only an ancillary
activity, and the Uber driver’s main income is generated through different
activities. Similarly, when the Airbnb host is resident in France and he rents out his
villa in Portugal for 2 months per year. This section will examine the contribution
of taxation in deciphering this complicated relationship in the context of the
In a cross-border scenario, a worker’s income may be taxed in multiple countries,
the country/ies where he works (source state(s)) and the country where he resides
(residence state). In order to limit or eliminate double taxation, countries usually
conclude Double Tax Treaties (DTTs). In a non-cross-border scenario where an
employee resides and works in the same place, obviously there would not be much
doubt as to where his income from employment should be taxed, although in the
context of the platform economy his work may not be visible to the tax authorities.
Things get more complex, however, in the case of frontier workers, or posted
workers, or people with multiple jobs across the globe. In these cases, usually the
DTTs aim, via their distributive rules, to “allocate taxing rights” between the
involved states. This allocation does not imply that the DTT creates a taxing right
in one state, but it rather suggests that if the income from employment has already
been taxed in state A (source state), then state B (the residence state) should refrain
from taxing the income again and provide for relief from the double taxation that
would otherwise arise.
In absence of a DTT, then in principle both the source
state and the residence state would have a right to tax.
The relief is usually provided either via the exemption method (Article 23A OECD MC) or the
credit method (Article 23B OECD MC).
These DTTs usually follow the Organisation for Economic Cooperation and
Development Model Convention on Income and Capital (hereinafter OECD MC).
Article 15 of the OECD MC provides that when employment is exercised in a
country other than the residence country, then salaries, wages and other similar
remuneration shall be taxed in the source state, in other words the state where
employment is performed. The double taxation that could arise may, thus, be
resolved either via the applicable DTTs or in an intra-EU scenario, by resorting to
the non-discrimination principle and the fundamental freedoms, provided some
other conditions are met.
1. Double Tax Treaties and the OECD MC
In social law, it has already been discussed whether the place of work rule (as a
conflict of law rule of Regulation 883/2004) is still apt for social insurance
purposes. Other options (based on the location of a platform provider or of a client)
would, on the one hand, address the problem that platform providers and clients
might try to take advantage of “a planetary labour market” in digital work,
platforms and clients can choose the cheapest platform workers (service providers)
and countries without social and tax obligations imposed on platforms or clients.
On the other hand, such options are inconsistent with the collection of social
contributions at the source.
The underlying problem in both social law and tax law is finding a nexus to tax or
to collect social security contributions in a digitalised world. It has been widely
accepted that the rules defining the legal bases upon which a State may assert its
tax jurisdiction over a particular taxpayer or an item of income (nexus rules) will
Developing countries usually follow the UN Model, which is similar (but not identical) to the
There is extensive CJEU case law that requires, inter alia, that resident and non-resident
taxpayers are found to be in a comparable situation.
Graham, Mark/Anwar, Mohammad Amir, The Global Gig Economy: Towards a Planetary
Labour Market? in: First Monday, 24 (2019) 4.
have to be rewritten.
The purpose of this section is to provide for an overview of
the existing allocation rules with regard to income from employment, in order to
investigate whether they can provide a) for any useful guidance as to the
distinction between independent contractors and employees and b) whether they
are still apt for use in the context of the platform economy.
According to the OECD MC, different taxing allocation rules exist depending on
the activity of the “worker”. Thus, different provisions exist for entertainers and
sportspersons whose income may be taxed in the state where they perform (Article
17 OECD MC), pensions that are usually taxable in the state of residence of the
recipient (Article 18 OECD MC), government services (Article 19 OECD MC) and
students (Article 20 OECD MC). Of relevance for the purposes of taxation of
workers and/or self-employed persons are also Article 7 OECD MC on business
profits, as well as the definition of what constitutes a Permanent Establishment
(hereinafter PE) in Article 5 OECD MC, and when and how profits can be
attributed to it. If an enterprise carries out business through a PE, the profits that
are attributable to the PE may be taxed in the state of the PE. Such may be the
case, for instance, when a company carries out business in another state via a
While the aforementioned provisions will at first appear rather evident as to their
application in a cross-border scenario, there are too many variables to be
considered in order to answer where the particular income will be taxed, and how it
will be taxed. These variables include factual assessments, such as the frequency
with which a frontier worker returns to his “home country” during a fiscal year;
as well as interpretative assessments including qualification of the particular
residence qualification and qualification (or absence thereof) of the
“employee” status. This ensuing lack of coordination becomes all the more visible
Gadzo, Stjepan, New Nexus for the Digital Economy: An Analysis of Digital, Revenue-Based
and User-Based Factors, in: Pistone, Pasquale/Weber, Dennis (eds.), Taxing the Digital
Economy: The EU Proposals and other Insights, Amsterdam: IBFD 2019, p. 93.
For more information on the distinction between dependent and independent agent, see
paragraph 32 of the OECD MC Commentary on Article 5.
See, for instance, Article 15 (2) of the OECD MC.
For instance, does the income at issue qualify as income from employment or as business
profit? The distinction is not always clear and depends also on the qualification of the person at
issue as employed or self-employed.
in the context of the digital economy, whereby physical presence is not essential
and the type of work provided is uncertain, in terms of frequency, ancillary
character and legal definition.
However, the OECD MC could be of assistance in understanding the concept of
employment in international tax law. Article 15 (1) and (2) OECD MC read:
“1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other
similar remuneration derived by a resident of a Contracting State in respect of an
employment shall be taxable only in that State unless the employment is exercised
in the other Contracting State. If the employment is so exercised, such
remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the other
Contracting State shall be taxable only in the first-mentioned State if:
a) the recipient is present in the other State for a period or periods not exceeding in
the aggregate 183 days in any twelve month period commencing or ending in the
fiscal year concerned, and
b) the remuneration is paid by, or on behalf of, an employer who is not a resident
of the other State, and
c) the remuneration is not borne by a permanent establishment which the employer
has in the other State.”
Article 15 OECD MC includes several undefined terms, on which the Commentary
attempts to shed some light.
However, the concept of employment itself is not
analysed in the Commentary. Instead, the Commentary only acknowledges that
“[…] the issue of whether or not services are provided in the exercise of an
employment may sometimes give rise to difficulties which are discussed in
Note the change in the title of Article 15 OECD MC in 2000, from “Dependent Personal
Services” to “Employment”. The amendment followed the elimination of Article 14 OECD MC
which referred to “Independent Personal Services”.
For a discussion on the many undefined terms, see Peeters, Bernard, Article 15 of the OECD
Model Convention on “Income from Employment” and its Undefined Terms, in: European
Taxation 44 (2004) 2, pp. 72-82.
paragraphs 8.1 ff”.
Yet, one could argue that from the remaining Commentary
some valuable characteristics of what constitutes employment in this particular
context could be derived.
Subject to the limit described in paragraph 8.11 and unless the context of a
particular convention requires otherwise, it is a matter of domestic law of the State
of source (i.e. the place where the employment is exercised) to determine whether
services rendered by an individual in that State are provided in an employment
relationship and that determination will govern how that State applies the
In such cases, the relevant domestic law may ignore the way in
which the services are characterised in the formal contracts. It may prefer to focus
primarily on the nature of the services rendered by the individual and their
integration into the business carried out by the enterprise that acquires the services
to conclude that there is an employment relationship between the individual and
The Commentary then goes on to give guidance on when a formal
contractual employment relationship should be disregarded, taking into account the
relevant facts and circumstances.
As already mentioned, the distinction between
“employment services” and “services rendered under a contract for the provision of
is important for the application of the relevant DTT article and the
allocation of taxing rights between the states.
The Commentary encourages the
involved states to solve any disagreement as to the qualification of the work
relationship having regard to the nature of the services rendered by the individual.
Commentary on Article 15 (1) OECD MC (2017 version). See also para. 8.1. of the
Commentary on Article 15 (1) OECD MC that provides: “It may be difficult, in certain cases, to
determine whether the services rendered in a State by an individual resident of another State, and
provided to an enterprise of the first State (or that has a permanent establishment in that State),
constitute employment services, to which Article 15 applies, or services rendered by a separate
enterprise, to which Article 7 applies or, more generally, whether the exception applies.”
Para. 8.4. of the Commentary on Article 15 (1) OECD MC (2017 version).
Para. 8.7. of the Commentary on Article 15 (1) OECD MC (2017 version).
See notably para. 8.11. of the Commentary on Article 15 (1) OECD MC (2017 version): “For
instance, a State could not argue that services are deemed, under its domestic law, to constitute
employment services where, under the relevant facts and circumstances, it clearly appears that
these services are rendered under a contract for the provision of services concluded between two
Similar to the concept of the independent contractor.
In the case of the independent contractor, Article 7 OECD MC would apply whereas in the
case of employment, Article 15 OECD MC would apply. The two articles allocate in a different
manner the taxing rights of the residence and the source state.
In this bid, according to the Commentary, when the services rendered by the
individual constitute an integral part of the business of the enterprise to which
these services are provided, “it is logical to assume” that an employee will be
providing such services.
For that purpose, a key consideration will be which
enterprise bears the responsibility or risk for the results produced by the
Additional factors and questions to be taken into account when determining the
working relationship, include:
- who has the authority to instruct the individual regarding the manner in
which the work has to be performed;
- who controls and has responsibility for the place at which the work is
- whether the remuneration of the individual is directly charged by the formal
employer to the enterprise to which the services are provided;
- who puts the tools and materials necessary for the work at the individual’s
- who determines the number and qualifications of the individuals performing
- who has the right to select the individual who will perform the work and to
terminate the contractual arrangements entered into with that individual for
- who has the right to impose disciplinary sanctions related to the work of that
- who determines the holidays and work schedule of that individual.
These indicative factors do not provide for any clear solutions as to the
qualification of gig workers. As Reis and Chand observe, both indications of
employment (some degree of subordination and control by the company) and of
independent services (flexibility of the drivers) can be met in the case of Uber
Para. 8.13. of the Commentary on Article 15 (1) OECD MC (2017 version).
The factors as appear in para. 8.14. of the Commentary on Article 15 (1) OECD MC (2017
version). Note that the Commentary suggests that these are “additional factors [that] may be
relevant to determine whether this is really the case [i.e. a formal employment relationship or a
contract on the provision of services].”
Consequently, while the OECD MC provides for some indicia that could
lead to the platform workers’ classification, the “hybridity” of many platform
models that encompass worker characteristics of both an employee and a contactor
cannot be resolved by solely relying on the Commentary. In case of no agreement
between the states, the Commentary advises to use, where appropriate, the mutual
agreement procedure (MAP) to resolve the tax dispute.
2. Can VAT Provisions be of any Help?
a) Carrying out Activities “Independently”
The payment of indirect taxes, specifically VAT, may also provide for guidance
with respect to the distinction between independent contractor and employee in the
context of the platform economy. In general, employees are not required to register
for and pay VAT, unlike independent contractors. One of the distinguishing criteria
is, once again, the exercise of activities “independently”. Article 10 of the EU
VAT Directive provides that the requirement of “independent” activity, to qualify
as a VAT “taxable person”,
excludes “employed and other persons from VAT in
so far as they are bound to an employer by a contract of employment or by any
other legal ties creating the relationship of employer and employee as regards
working conditions, remuneration and the employer's liability.” Therefore, the
concept of independence becomes once again essential in informing the distinction
between independent contractor and employee.
In the Court’s case law, the three criteria used to determine whether an activity is
carried out independently, include: a) whether it is exercised by a person who is
not organically integrated into the undertaking; b) whether the person at issue has
the appropriate organisational freedom with regard to the human and material
resources used in the exercise of the relevant activity; and c) whether the person at
issue bears any economic risk when performing the relevant activity.
Reis/Chand, Uber Drivers: Employees or Independent Contractors? (see fn. 44).
For the concept of the “taxable person” in EU VAT law see Article 9 (1) Council Directive
2006/112/EC of 28 November 2006 on the common system of value added tax (hereinafter EU
VAT Directive), https://eur-lex.europa.eu/eli/dir/2006/112/oj. Accessed 14 July 2020; analysed
Note, however, that the concept of “employee” is not defined anywhere in the VAT Directive.
It is obvious that an evaluation of the aforementioned criteria necessitates an ad
hoc factual assessment. The CJEU has provided guidance as to the concept of
independence in the context of the VAT Directive in several cases.
these criteria in the platform economy, one may note that usually “gig workers” are
not organically integrated into the platform, they have sufficient organisational
autonomy to decide whether to drive their cars or rent their properties, and that
their remuneration is not regular and secured in that it depends on the number of
transactions concluded. The “independent activity” criteria, therefore, as enshrined
in Article 10 of the EU VAT Directive are usually met. However, this does not
suffice to qualify a “gig worker” as a “taxable person” for VAT purposes. Article 9
provides for a number of further conditions, which I turn to examine now.
b) Taxable Person
According to the EU VAT Directive, the definition of a taxable person includes
any person or entity “who, independently, carries out in any place any economic
activity, whatever the purpose or results of that activity”.
Hence, employed and
other persons bound to an employer by a contract of employment or by any other
legal ties creating the relationship of employer and employee as regards working
conditions, remuneration and the employer’s liability, escape taxability under the
The test the CJEU usually applied to establish whether a particular activity,
including the renting out of property, fulfils Article 9 (1) of the VAT Directive
examines whether the activity is carried out for the purpose of obtaining income on
a continuing basis.
This criterion must be assessed on a case-by-case basis
See for instance, ECJ of 18 October 2007, Case C-355/06, van der Steen, EU:C:2007:615,
where the CJEU ruled that since the sole director at issue received regularly his salary regardless
of the company’s financial situation, he could not qualify as independent supplier and, hence,
was not a taxable person for VAT purposes. Also, ECJ of 12 October 2016, Case C-340/15, Nigl,
Article 9 (1) EU VAT Directive. With regard to the second condition (i.e., independent
performance), it may be concluded that in cases where the sharing platform can be recognised as
an employer of an individual provider (for the latter, the criteria of the existence of a
subordination link, the nature of work and the presence of remuneration should be assessed
pursuant to EU law), the individual provider may not be regarded as a taxable person. In such
cases, only the sharing platform may be regarded as a taxable person instead – also with regard
to underlying supplies of goods and services.
ECJ of 19 July 2012, Case C-263/11, Rēdlihs, EU:C:2012:497, para. 33; ECJ of 20 June 2013,
Case C-219/12, Finanzamt Freistadt Rohrbach Urfahr, EU:C:2013:413, para. 19.
“having regard to all the circumstances of the case, which include, inter alia, the
nature of the property concerned”.
The term “economic activity” has been interpreted by the CJEU in very broad
terms, considering the activity per se rather than its purpose or results.
these lines, the CJEU has repeatedly held that:
[T]he fact that [the] property is suitable only for economic exploitation will
normally be sufficient for a finding that its owner is exploiting it for the
purposes of economic activities and, consequently, for the purpose of
obtaining income on a continuing basis. By contrast, if, by reason of its
nature, property is capable of being used for both economic and private
purposes, all the circumstances in which it is used will have to be examined
in order to determine whether it is actually being used for the purpose of
obtaining income on a continuing basis (emphasis added).
Consequently, if the property is, due to its nature, clearly used for purposes of
obtaining income on a continuing basis, then it (the economic activity) will be
subject to VAT. If the use of the property, as matter of fact, is not clear, then a
more complex, factual analysis will be necessary to assess whether the activity is
carried out for the purpose of obtaining income on a continuing basis.
Several issues arise with respect to whether “platform workers” are (and should
be) subject to VAT. At first sight, the CJEU-made “continuity” condition seems to
be rebuttable: for instance, in the case of Airbnb rentals, if one shows that the
purpose of renting out the property for a very short period did not aim at “obtaining
income on a continuing basis”, then the activity will not be subject to VAT.
Hence, in a strictly literal interpretation of the phrase, it remains unclear whether
someone who has rented out his apartment every August for the past five years
should be assessed. Recent legislation in some countries has reduced, for non-tax-
Ibidem, Rēdlihs, para. 29.
ECJ of 12 January 2006 Joined Cases C-354/03, C-355/03 and C-484/03, Optigen Ltd,
Fulcrum Electronics Ltd, Bond House Systems Ltd v. Comm’n, EU:C:2006:16, para. 43 and ECJ
of 26 March 1987, Case C-235/85, Comm’n v. Netherlands, EU:C:1987:161, para. 8.
ECJ of 19 July 2012, Case C-263/11, Rēdlihs, EU:C:2012:497, para. 34; ECJ of 20 June 2013,
Case C-219/12, Finanzamt Freistadt Rohrbach Urfahr, EU:C:2013:413, para. 20.
related reasons, the number of days a service provider can provide short-term
rentals of his immovable property.
Article 12 of the VAT Directive attempts to ensure that even these service
providers can be made subject to VAT: it stipulates that “Member States may
regard as a taxable person anyone who carries out, on an occasional basis, a
transaction relating to the activities referred to in the second subparagraph of
Article 9(1)” (emphasis added). While the CJEU has held that the mere exercise of
the right of ownership and the management of the private property do not
constitute economic activity,
it has also ruled that if the party has taken active
steps to market property by mobilising resources similar to those deployed by
producers, traders or persons supplying services within the meaning of Article 4(2)
of the [VAT] Directive, such as, in particular, “the carrying out on that land of
preparatory work to make development possible, and the deployment of proven
marketing measures,” then such initiatives go beyond mere exercise of the
management of the private property.
In other words, marketing or advertising the
property constitutes, in the CJEU’s view, the distinctive element that separates the
mere management of private property from its economic exploitation.
This very broad, CJEU understanding has led the Commission to suggest that:
“Given the very wide understanding of the concept of economic activity […] it can
be therefore concluded that the supplies of goods and services made through
sharing-economy platforms, such as driving customers to requested destinations or
renting out immovable property may qualify as an economic activity in the sense of
the VAT Directive irrespective of whether such supplies are delivered with clear
continuity or on a more occasional basis” (emphasis added).
In Paris, for instance, short-term rentals (Airbnb type) were reduced by law to a maximum of
120 days per year. In Amsterdam, owners will be able to rent out their property through Airbnb
only for thirty days per year.
ECJ of 15 September 2011, Joined Cases C-180/10 & C-181/10, Słaby & Others,
EU:C:2011:589, para. 36; ECJ of 9 July 2015, Case C-331/14, Trgovina Prizma,
EU:C:2015:456, para. 23.
ECJ of 15 September 2011, Joined Cases C-180/10 & C-181/10, Słaby & Others,
EU:C:2011:589, para. 39-41; ECJ of 9 July 2015, Case C-331/14, Trgovina Prizma,
EU:C:2015:456, para. 24.
European Commission, Question Concerning the Application of EU VAT Provisions: VAT
Treatment of Sharing Economy 6, Value Added Tax Comm., Working Paper No. 878, 22
September 2015, https://circabc.europa.eu/sd/a/878e0591-80c9-4c58-baf3-b9fda1094338/8
Indeed, under these circumstances, and as the Commission notes, it seems almost
impossible for “platform workers” to escape the “taxable person” definition. In the
Airbnb and Uber scenarios, therefore, once someone uploads an apartment for rent
or avails himself of the opportunity, through the Uber platform, to drive someone
to that person’s destination, he automatically becomes a taxable person for VAT
purposes, even if he only does so on an occasional basis.
Beretta lists the following as the main conditions to check whether an individual
supplier carries out an economic activity pursuant to Article 9 of the VAT
Directive: non-exclusionary membership, organisational autonomy, economic risk,
regulatory autonomy, remuneration independence and personal liability.
four different platforms to evaluate whether these criteria are met: Airbnb, Uber,
HomeExchange and BlaBlaCar and he notes that the assessment varies
significantly depending on the platform at issue.
Upon carrying out a functional
analysis, he concludes that only Uber drivers “might eventually be recharacterised
as employees of the platform” as long as they tick more than half of the criteria
c) Economic Activity/ Income Definition
Although one would expect that the definition of the type of work precedes the
income definition, it is noteworthy to examine the questions that pertain to what
kind of income should be taxed. To exemplify the problem, income arising from
renting property via Airbnb could be classified as either income from immovable
property or income from business.
The distinguishing criterion in answering this question is a thorny issue. The
remuneration or “income” the platform worker receives varies widely depending
78%20-%20VAT%20treatment%20of%20sharing%20economy.pdf. Accessed 14 July 2020.
The only obvious escape from the application of VAT in such circumstances would be the
application of the de minimis exemption from VAT reporting. In this vein, some Member States
have established a minimum annual turnover for VAT imposition (VAT registration threshold).
See subsection below.
Beretta, Giorgio, European VAT and the Sharing Economy, Alphen aan den Rijn: Wolters
Kluwer 2019, p. 99.
on the platform itself and the worker himself. As the Commission pointed out, such
income could range from “recovering costs (e.g.[,] for the personal use of a good
such as in ride-sharing/car sharing) to amounts comparable to business/work
While the Commission suggests that “tax rules should follow national
laws and jurisprudence, which determine from which moment an activity becomes
a business activity,”
income is not defined in a uniform manner across the
Member States. That fact adds to the uncertainty of the definition of what
constitutes an economic activity, according to the test the CJEU employs.
Accordingly, the same activity may constitute an economic activity for VAT
purposes in one Member State and not in another because the remuneration at issue
does not qualify as income. If one adds to that situation the different thresholds
Member States apply by reference to what constitutes a “professional activity” vis-
à-vis an “occasional” activity of private individuals, the fulfilment of the
aforementioned definitions becomes even more segregated.
Another interpretation difficulty across the different Member States relates to the
exemption of “small businesses” (i.e., businesses with low annual turnover) from
This special exemption scheme is applied in most EU Member
States, but it is not compulsory. Unfortunately, the VAT Directive does not specify
whether “small taxable persons” who participate in the sharing economy (e.g.,
somebody who occasionally rents out his apartment) can benefit from such
exemption schemes. One (administratively burdensome!) option would be to treat
them all as “full-blown taxable persons” based on “tax points”.
The other option
would be to extend the special rules for small businesses to the “small taxpayers”
in the context of the sharing economy.
European Commission, Communication from the Commission to the European Parliament, the
Council, the European Social and Economic Committee and the Committee of the Regions on A
European Agenda for Collaborative Economy, COM (2016) 356, p. 41 (hereinafter EU
Collaborative Economy Agenda), available at https://ec.europa.eu/transparency/
regdoc/rep/1/2016/EN/1-2016-356-EN-F1-1.PDF. Accessed 10 June 2020.
Articles 284-287, EU VAT Directive. Member States are allowed to exempt small businesses
from VAT registration up to a given threshold.
Kogels, Han/van Hilten, Markien, Never a Dull Moment, in: International VAT Monitor, 28
(2017) 2, p. 121. Tax points (or “time of supply”) for a transaction is the date the transaction
takes place for VAT purposes. Tax points can be, for instance, the date of invoice or the day the
supply took place.
Ibid., p. 122.
As a yardstick for measuring the level of business activity, a person’s annual
turnover, exclusive of VAT, is generally used.
However, registration thresholds
vary consistently among Member States. Some Member States set very high
thresholds before a person incurs VAT payment obligations. Italy for instance, sets
a registration threshold at EUR 65,000, whereas Finland and Greece do so at only
It is doubtful how many Airbnb hosts would reach the Italian
threshold, and how much the market would be distorted due to these differences.
Some other Member States, such as Greece, grants service providers an exemption
from VAT as long as the host does not provide any services similar to the ones
offered by hotels, such as regular cleaning and linen changes.
A remedy against potential tax evasion that could arise from the non-payment of
VAT by platform workers is the collection of such VAT by the relevant platform
(in addition to any other taxes they collect), provided, however, that the hosts have
exceeded the threshold for VAT registration. This would presuppose an updated
and informed reporting system between the platform and the platform worker. This
way, all relevant details that would define the amount to be paid by the taxpayer
would already be available to the platform and the risk of tax evasion would be
3. Enforcement and Collection
An additional problem that is created by blurring the boundaries between
employment and self-employment in the platform economy is the difficulty for the
authorities to “follow the money”.
The lack of visibility of the activity and the
Beretta, Giorgio, VAT and the Sharing Economy, in: World Tax Journal 10 (2018) 3, pp.
For VAT registration thresholds, see https://www.avalara.com/vatlive/en/eu-vat-rules/eu-vat-
number-registration/vat-registration-threshold.html. Accessed 14 July 2020.
Houlder, Vanessa, Airbnb’s Edge on Room Prices Depends on Tax Advantages. Financial
Times. 2.1.2017, https://www.ft.com/content/73102c20-c60e-11e6-9043-7e34c07b46ef, reported
that: “When you book an Airbnb room in London, around a third of the $100 saving you make
over the price of an average hotel room is due to tax advantages that favour Airbnb’s business
model.” Accessed 13 July 2020.
Article 111 (4) of Law 4446/2016 as amended by Law 4472/2017.
Mineva, Daniela/Stefanov, Ruslan, Evasion of Taxes and Social Security Contributions.
September 2018, European Platform Undeclared Work.
inability to identify potential taxpayers and their taxable income has cost the tax
authorities billions of tax revenue.
This obviously poses obstacles to effective
taxation and collection of taxes. The solutions for effectively taxing the sharing
economy, in the OECD’s view, should focus on improving the effective taxation of
activities facilitated by online platforms through improving taxpayer education and
Effective taxation becomes, hence, a matter of
collaboration between the platform and the taxpayer. This recommendation has
been implemented by some Member States that have attempted to incentivise the
service providers to include their income from the sharing economy when
completing their tax returns through simplified procedures or automated, pre-
prepared tax declarations available to the service providers directly through the
platforms. In France, for example, as of July 2016, collaborative platforms have
been legally obliged to communicate to each individual providing services in the
sharing economy an annual summary of their tax situation, mentioning how to do
their tax declaration and how much they have to declare to the tax authorities.
Other countries, like Belgium, provide tax incentives to platform workers if the
latter enrol with a platform and register their activities.
Reduced taxation applies
to platform workers who provide services up to a EUR 6000 exemption threshold
The platform must share the income of the platform worker with the
tax administration. If the income exceeds the EUR 6000 cap, then the platform
worker must register as self-employed and be affiliated with the mandatory social
security system for the self-employed.
A commonly used example of a successful strategy for simplifying and
streamlining tax collection is Estonia. Upon working together with Uber, the
While estimates of lost tax revenue per country do not exist, this is a recurring theme. See for
instance, OECD, Shining Light on the Shadow Economy: Opportunities and Threats (see fn. 42);
Migai, Clement Okello/de Jong, Julia/Owens, Jeffrey, The Sharing Economy: Turning
Challenges into Compliance Opportunities for Tax Administrations, in: eJournal of Tax
Research, 16 (2018) 1 , https://www.business.unsw.edu.au/About-Site/Schools-Site/Taxation-
OECD, 2018 OECD Interim Report, p. 198 (see fn. 8).
EU Collaborative Economy Agenda, p. 43 (see fn. 96).
In order for the platform worker to benefit from the tax exemption, the platform needs to be
formally recognised by the Belgian authorities.
OECD, OECD Economic Surveys: Belgium 2020, p. 115.
Estonian Tax and Customs Board developed a (voluntary) income data reporting
system that would simplify the tax declaration process for Uber drivers. The main
idea was to minimise bureaucracy and facilitate automatic tax reporting for
businesses and entrepreneurs. Consequently, transactions between the driver and
the customer are registered by the collaborative platform, which then only sends
the data that is relevant for taxation purposes to the authorities, who in turn will
then preprepare the taxpayer’s tax forms. The main idea is to help taxpayers fulfil
their tax obligations effectively and with minimal effort. The voluntary income
reporting system has been operational since the 2017 tax year and it is not limited
to the ride sharing sector; all platform operators can use the system if they wish.
However, it remains an “opt-in” system – if the platform decides not to join, then
reporting relies on the “good will” of the platform worker.
Denmark has also developed an automated income reporting system that could be
used by all platforms. Currently, Denmark is testing the “technical pilot” in several
platforms in order to investigate the technical feasibility of having an automated
reporting scheme and a technology to support platforms and taxation.
reporting system necessitated a change in the Danish law in December 2018 stating
that digital platforms that facilitate the letting of property (homes, cars, etc.) should
report all income earned by users of the platforms to the Danish tax authorities.
Mexico is another example of successful cooperation between the tax authorities,
the platform and the service providers. By using data recording technologies that
drivers of a particular ride-for-hire service are able to use, the platform’s own
systems file and send invoices to the customers and to the Mexican Tax
Administration (Servicio de Administración Tributaria (SAT)), as well as
download them for record-keeping purposes.
In Australia, a consultation paper by the Treasury suggested that the reporting
“burden” should be placed either at the platform level or at the financial
See also Ogembo, Daisy/Lehdonvirta, Vili, (2020) Taxing Earnings from the Platform
Economy: An EU Digital Single Window for Income Data?, in: British Tax Review, 82 (2020) 1,
Ibid., p. 89.
Ibid. The authors also note that “[g]ig work platforms were also considered but excluded from
the scope of this initial legislation because of Denmark’s complex social security legislation.”
OECD, 2018 OECD Interim Report, p. 201 (see fn. 8). Drivers are obliged to register with the
particular recording system of the platform.
Operators of sharing economy platforms should be required to
collect and report to the Australian Taxation Office (ATO) key information such as
identity details and income received by their sellers based in Australia. Some
platforms may already provide transaction information on a regular basis to their
sellers, which assists them to meet their tax or other obligations and can be used by
the ATO to match and potentially to pre-fill in tax returns. This will contribute to
reducing the compliance burden on taxpayers.
Alternatively, the financial
institution or the payment processors, who would be required to report the
transaction data to the tax authorities, could incur the reporting burden. Such an
“opt-in” model – with variations – already exists in Estonia.
In July 2020, the OECD released a new global tax reporting framework, the Model
Rules for Reporting by Platform Operators with respect to Sellers in the Sharing
and Gig Economy ("MRDP").
Under the MRDP, digital platforms are required
to collect information on the income realised by those offering accommodation,
transport and personal services through platforms and to report the information to
tax authorities. While the model reporting rules included in the MRDP are not
compulsory for ‘interested jurisdictions’, they constitute a first consolidated effort
by the OECD to codify on a uniform basis information collection and information
reporting by specific platforms. This way, automatic exchange agreements between
such interested jurisdictions will be facilitated, and the proliferation of different
domestic reporting requirements will be contained.
The Australian Government Treasury, Tackling the Black Economy: A Sharing Economy
Reporting Regime – A Consultation Paper in Response to the Black Economy Taskforce Final
Report. January 2019, https://apo.org.au/node/216381. Accessed 10 June 2020.
For details on the “small business account”, see the relevant chapter (Estonia) in this volume.
OECD, Model Rules for Reporting by Platform Operators with respect to Sellers in the
Sharing and Gig Economy, available at: https://www.oecd.org/tax/exchange-of-tax-
Upon analysing the several problems and solutions provided from a tax
perspective, the question remains: how can taxation be of use for social law? The
first takeaway relates to the taxation of the platform. If platforms are tax-
incentivised to “hire” contractors, then obviously, they will resist any change in the
work relationship between them and the platform workers, as the Uber example in
California demonstrates. By contrast, if platforms receive adequate tax deductions
and credits that could set off the social security contributions they pay for
employees, then a formal employment contract would be an option for both parties.
The second question relates to the issue as to who should identify the work
relationship and under which criteria. While it is widely acknowledged that labour
law, social law and tax law serve different purposes, and that the same person may
be classified differently for social law or tax law purposes respectively, it appears
that the criteria of dependence, subordination and freedom in the way to provide
services are pertinent across jurisdictions and different legal areas, including within
taxation (VAT and OECD MC). Even though, indeed, an ad hoc assessment will
have to be performed each time, it is possible that the existing case law from these
three interrelated areas may result in convergence towards one, uniformly
applicable test. Such a coordinated approach would prevent resorting to circular
arguments including the platform worker’s tax treatment for labour law
classification purposes, which may lead to contradictory results.
Finally, the discussion at policy level appears to be slowly including the taxation of
platform workers and the revenue lost due to the platform shadow economy.
Platform workers, even when they fall under the “independent contractor” status
should be facilitated and encouraged to declare their income. A series of reporting
measures has been proposed by several countries that often requires the
cooperation of the platform, the worker and the tax authorities. Laudably, the
OECD published very recently its Model Rules for Reporting by Platform
Operators that aim to provide (in a consistent and uniform manner) guidance to
jurisdictions as to the reporting rules to be adopted and applied to platforms. A
combination of the right tax incentives at both platform and platform workers’
level, together with a simplified reporting system would contribute to ensuring
both adequate revenue to finance social security schemes as well as a framework
that would assist in fighting bogus self-employment.