ECJ Dismisses ViDA Deemed Supplier Challenge

In the two separate cases, the Italian-based association of individual owners who rent out their properties on a short-term basis, Pro.Loca.Tur., and Nomad Stays Co, the French digital platform operator through which independent property owners offer short-term accommodation rental, among others, to digital nomads, challenged the legality of specific provisions adopted as part of the EU’s ViDA reform package. 

More specifically, both the Pro.Loca.Tur. and Nomad Stays sought the annulment of provisions introducing the deemed supplier model for online platforms, initiating the procedure against the Council of the European Union (Council) before the Court of Justice of the European Union (ECJ).

Background of the Cases 

In the case of Nomad Stays, digital nomads primarily use the platform to search for, compare, and book accommodation in various EU countries. Notably, Nomad Stays do not provide accommodation but facilitate transactions between property owners and end users, typically earning a commission or service fee as intermediaries.

On the other hand, Pro.Loca.Tur. is an association of private landlords who rent out their real estate on a short-term basis. The primary goal of the association is to defend its members' collective interests before public authorities and institutions, including taking part in procedures related to the adoption of legislative or administrative measures that may restrict or adversely affect property rights in the context of short-term accommodation rentals. Thus, its main role is not commercial but representative and protective.

Given the impact of the ViDA package on short-term rental platforms, the French platform operator and Italian association decided to contest certain provisions of the Council Directive (EU) 2025/516 of 11 March 2025, which amends the EU VAT Directive.

As noted in both cases, Recitals 26 and 27 of the Directive in question explain the rationale behind the ViDA reform, underlying that growth of the platform economy has created an unjustified distortion of competition between services supplied through online platforms that often escape VAT and similar services supplied in the traditional economy that are subject to VAT.

In response to this imbalance, the EU legislature proposed amending the role of digital platforms in VAT collection by introducing the so-called deemed supplier model. As a result, platforms facilitating certain services are treated as if they had themselves received and supplied those services. 

The disputed legislation states that a taxable person who facilitates, through an electronic interface such as a marketplace or platform, the supply of short-term accommodation rental services within the EU, i.e., up to 30 days, is deemed to have received and supplied those services themselves. Essentially, where the underlying provider does not charge VAT, the platform becomes responsible for charging and remitting VAT.

Notably, in its response, the Council requested a ruling on the inadmissibility of the action, arguing that Pro.Loca.Tur. and Nomad Stays lack the legal right to bring a case before the ECJ. Moreover, the Council claimed that the association and digital platform operator are neither individually nor directly affected by those disputed provisions and therefore do not meet the legal requirements to bring the action.

Main Requests For the Ruling

Both the Pro.Loca.Tur. and Nomad Stays sought from the ECJ to annul the partial annulment of Article 3(1) of Council Directive (EU) 2025/516 of 11 March 2025, which amends the EU VAT Directive, the full annulment of Article 3(3)(a) of the same Directive, as well as the partial annulment of Article 1(8) of the implementing regulation.

In addition to seeking an annulment of these provisions introduced with the ViDA package from the ECJ, the Pro.Loca.Tur. and Nomad Stays also requested that the ECJ order the Council to pay the costs of the proceedings.

Applicable EU Law

While the central point of dispute was previously stated articles introducing VAT rules for the digital age, thus amending the EU VAT Directive, due to the Council's request for a ruling on the inadmissibility of the action, the ECJ focused on Article 130(1) and (7) of the Rules of Procedure of the General Court. Under Article 130(1) and (7), the ECJ may, at the request of a defendant, in this case the Council, decide that an action is inadmissible or that it lacks jurisdiction without addressing the substance of the case.

France and Italy National VAT Rules

ECJ did not review or interpret any national VAT rules or regulations, as the main point of dispute concerned the introduction of deemed supplier rules for short-term accommodation rental services at the EU level.

Importance of the Case for Taxable Persons

Considering the specifics of the case, as well as the ECJ's reasoning and decision, the significance of these cases for taxable persons lies in their highlighting the practical and legal implications of the EU’s ViDA reforms, particularly regarding the deemed supplier model for online platforms facilitating short-term accommodation rentals.

Additionally, these two cases raise awareness of who has legal standing to challenge EU VAT rules, directly explaining to taxable persons when their requests may be admissible or inadmissible, which ultimately has implications for businesses or industry groups considering legal action against EU VAT measures.

Analysis of the Court Findings

Given the Council request, the ECJ turned to determining Pro.Loca.Tur. and Nomad Stays stand for bringing the proceedings before the ECJ. More specifically, the ECJ underlined that under EU law, any natural or legal person may bring an action against an EU act addressed to them, or against a regulatory act that directly affects them, without the need for implementing measures. However, to establish standing to challenge the directive, these persons must show that they are directly and individually concerned by the specific provisions it seeks to annul.

In more practical terms, those who seek the annulment must demonstrate that the disputed provisions affect it in a particular way, rather than merely applying to a broad category of economic operators. Therefore, ECJ sought to determine whether Pro.Loca.Tur. and Nomad Stays had direct and individual concerns for seeking annulment, as well as whether they are directly and individually concerned by Article 1(8), which defines facilitation services for the deemed-supplier model.

In case of Pro.Loca.Tur. the ECJ added that EU case law recognises three specific situations in which an association can bring an action for annulment. The first situation in which an association may act is if a legal provision explicitly grants it procedural powers. Also, it may bring proceedings on behalf of its members if those members would themselves have standing to challenge the act. And finally, an association may act on its own behalf if the contested measure directly affects its own interests.

Since the first situation does not apply to this case, the Pro.Loca.Tur. relied on the second and third situations, arguing that the disputed provisions both affect its own interests as an association and directly concern its members.

On account of direct concern, Nomad Stays argued that the disputed provisions directly affect its legal and economic situation by imposing a new obligation: to collect and remit VAT on behalf of short-term accommodation providers using its platform. Furthemore, it claimed this requirement will generate high operational and administrative costs and could raise prices for end users, potentially reducing its competitiveness as a platform.

On the same account, the Pro.Loca.Tur. stated that, in general terms, the provisions affect its legal and economic position because they impose VAT obligations on income from private property rentals, which conflicts with the association’s purpose of defending its members’ interests.

The ECJ noted that, under EU rules and established case law, for a person or entity to be considered directly concerned by an EU measure, two conditions must be met. The measure must directly affect the legal situation of that person, and the measure's implementation must be automatic, leaving no discretion to the national authorities responsible for applying it.

In the present case, the provisions in question are aimed at platform operators and other facilitators, not at individual accommodation service providers, and the EU countries have the discretion to set the criteria, conditions, and limitations for applying the deemed-supplier scheme. Moreover, the ECJ stated that Article 1(8) of the Implementing Regulation is merely definitional and does not, in itself, impose obligations or directly alter the legal situation of the applicant.

Regarding the individual concerns, Nomad Stays stated that it is individually concerned because it is the only platform specifically targeting digital nomads, adding that its business model differs from traditional platforms, which typically handle short-term tourist bookings, and from long-term rental providers, who are outside the Directive’s scope. Due to its unique business model, the platform operator considered itself particularly exposed to the effects of the deemed-supplier model.

Pro.Loca.Tur., on the other hand, claimed that it is individually concerned because the disputed provisions undermine the very purpose of its existence, namely to defend the property rights of owners who rent their properties on a short-term basis. The association added that classifying short-term rentals as taxable and subject to VAT affects not only the legal and economic position of those owners but also the association itself, including its ability to operate and represent its members effectively.

When addressing those claims, the ECJ underscored that EU case-law established that a measure is considered individually concerned when it affects a specific person in a way that distinguishes them from all others, either because of particular attributes or a factual situation unique to them, effectively treating them similarly to an addressee of the measure.

From that perspective, the ECJ noted that the disputed Directive and Implementing Regulation are acts of general application, which do not target specific persons or entities but instead establish rules that apply broadly across all platforms and service providers in the relevant sectors.

Courts Final Decision

After examining the grounds for initiating the proceedings in great detail, the ECJ, more specifically the European General Court (EGC), determined that both Pro.Loca.Tur. and Nomad Stays lacked direct and individual concerns and declared both requests inadmissible. Consequently, because the action has been dismissed as inadmissible, the EGC did not rule on the European Commission’s application to intervene in support of the Council. 

Furthermore, both Nomad Stays and Pro.Loca.Tur. are responsible for their own legal costs and must also cover the costs incurred by the Council, while the Commission will bear its own costs relating to its application to intervene.

Conclusion

These cases illustrate that, even when a measure has significant economic or operational implications for certain businesses or associations, standing before the ECJ requires demonstrating a direct and individual concern, a high threshold under EU law. On the other hand, despite being dismissed as inadmissible, two cases drew attention by directly questioning the introduction of the deemed supplier model for short-term accommodation rentals and offering a different angle on the matter.

Source: Case T‑394/25 - Nomad Stays Co v Council of the European Union, Case T‑393/25 - Associazione proprietari alloggi dati in locazione turistica (Pro.Loca.Tur.) v Council of the European Union, EU VAT Directive, Council Directive (EU) 2025/516 of 11 March 2025, Council Implementing Regulation (EU) 2025/518 of 11 March 2025