Update: 21 June 2023
Changes are coming to VAT on virtual events. To ensure taxation in the Member State of consumption, all services supplied to a customer electronically will be taxable where the customer is established, has his permanent address or usually resides.
Member States must adopt and publish the required laws, regulations and administrative provisions by 31 December 2024 and must apply these from 1 January 2025. This blog will consider some of the issues that may arise from the impending changes.
Current VAT position regarding events with physical attendance
Where there is physical attendance at an event then the place of supply is the place where the event takes place for all delegates.
Current VAT position regarding events with virtual attendance
For B2B delegates the current rules mean that virtual admission will be classified as a general rule service so VAT is due where the customer is established.
For B2C delegates the current rules depend on whether the virtual attendance can be considered an electronically delivered service or a general rule service. For electronically delivered services supplied, the place of supply is where the customer normally resides and for other services the place of supply is where the supplier is established.
Future tax position for events with virtual attendance
The changes apply to “services that can be supplied by electronic means” but this is not defined. It would appear, from the following to be wider than “electronically delivered”.
To achieve this the current law governing attendance by B2B delegates which results in VAT being due where the event is held will specifically exclude admission where the attendance is virtual.
This suggests that “supplied to a customer by electronic means” occurs when attendance is virtual. This has the effect of removing the distinction of “human intervention” in respect of electronically delivered services.
The law governing B2C sales will state that where activities are “streamed or otherwise made virtually available”, the place of supply is where the customer is established.
These changes suggest that “supplied to a customer by electronic means” occurs when the service is streamed or available virtually. The possibility of streaming (which can be live or recorded) does not appear in the amendment to the B2B rule.
An update to the law governing use and enjoyment reflects these additions.
Exemption from VAT
Many hosts currently use the available educational or fundraising exemptions, especially where the delegates are private individuals without the right of deduction, e.g., doctors. For events with physical attendance the host must consider the rules of the Member State where the event is held since that is where the VAT is due.
Under the new rules, a VAT exemption will be less relevant for B2B virtual events where the reverse charge applies as the attendee assesses the charge to tax themselves. However, it will remain relevant where delegates are unable to apply the reverse charge and unable to deduct the VAT charged – e.g. doctors. In such circumstances, VAT is due where the doctor normally resides and that is where the exemption must be considered.
These new rules may require the host to assess the availability of the exemption in several Member States and may also require multiple ruling request submissions. This is likely to increase operating costs substantially, and the (unintended) consequence could be that exemptions are not considered to the detriment of delegates.
Many future events are likely to include virtual attendees since it increases overall attendance at an event, requiring the host to manage two invoicing regimes.
There could be issues where one taxpayer has both physical and virtual attendees. In this case, the host will need to issue two invoices – one with local VAT for the physical attendance (and where the exemption may apply) and one where VAT is due in the customer’s Member State and the general reverse charge may apply. The attendance of B2C delegates will further increase this complexity for the host.
What happens if a delegate is invoiced for physical attendance, but changes to virtual attendance at the last minute?
When the host provides the login details for virtual attendance, this may change the place of supply. If the place of supply changes, the host must cancel the original invoice and issue a new invoice with the amended VAT treatment.
Non-EU hosts with B2C events
Where a host currently holds an event with virtual admission for non-taxable EU delegates (e.g. doctors) then the place of supply is where the supplier is established. For a host established outside the EU, no EU VAT is due (ignoring the possibility of use and enjoyment), and it is also likely that no local VAT is due in the host’s own country.
Implementation of the new rules will mean that the host must charge VAT in the Member State where the doctor normally resides. This will not only result in unrecoverable VAT for the doctor but will also increase the compliance costs of the host. Virtually attending such an event in 2025 may become significantly more expensive than in previous years.
The article governing the transposition of these changes requires Member States to “adopt and publish” the necessary laws, regulations etc., by 31 December 2024. The changes will then apply from 1 January 2025.
Member States must not break rank and apply these rules before this date. A situation where some Member States adopt and apply the rules early could lead to double taxation, particularly in B2C transactions.
Once the rules are in force on 1 January 2025, several issues could arise. What happens for an event in January 2025 where delegates must pay for admission ahead of time in 2024? Where is VAT accounted for, and under which rules?
For B2B, there should be no issue since the service remains a general rule, but there is a real issue for non-taxable delegates, e.g. doctors.
For example, a US host holds an event where a German doctor will attend virtually. The event is in January 2025, but the delegate must pay the admission fee by 30 November 2024 to secure a place. Under current rules, applicable in 2024, the place of supply is where the supplier is established, so no VAT is due on the invoice. But when the event happens in January 2025, the new rules say that German VAT is due.
The time of supply rules are not affected by these changes but could a tax authority seek to change these to increase its tax revenue? For example, Greek VAT law says that the tax point is when the event takes place – not when the invoice is issued/payment received. So, in the above example, Greek VAT would be due for a Greek B2C delegate.
Reduced rates for VAT on virtual events
When considering the taxation of virtual events, the new rules state it should be possible for Member States to provide the same treatment of live-streamed activities, including events, as those which are eligible for reduced rates when attended in person.
To enable this, amendments to the annex detailing which services can benefit from a reduced rate will include admission to:
- Amusement parks
- Cultural events or facilities
- Live streaming of any of these events/visits
This change means that events that are live streamed can benefit from a reduced VAT rate. Though the changes to the place of supply rules refer to “virtual attendance” for B2B and “streamed or made virtually available” for B2C.
Are we to assume that “virtual attendance” = “live streamed”? But “streaming” can be live or recorded. Do these changes also cause an issue for VAT rate determination?
If a delegate watches an event live, then a reduced rate is possible. If the same event is watched via downloading a recording later, then the reduced rate is not possible. If one fee gives a delegate the right to attend the event virtually and download the event for future reference, then the concept of a mixed supply may be relevant.
Summary of future VAT on virtual events rules
For events attended virtually, the place of supply for both B2B and B2C will be where the customer is established – although this can be amended by application of the use and enjoyment rules.
For B2B attendees, the host will not charge local VAT as the reverse charge will apply unless the host and attendee are established in the same Member State.
For B2C attendees the host will charge local VAT according to the location of the attendee. The Union and non-Union One-Stop Shop (OSS) will be available to assist reporting where the attendee is in the EU.