VAT Director Rob Janering discusses new VAT reporting obligations for hosted events, seminars and exhibitions as a result of the COVID-19 crisis.
The spread of COVID-19 across the globe has seen many countries implement lockdown procedures for its citizens and businesses cease to trade. At the time of writing, some countries have tentative guidance on when lifting of these measures might be. But, across the board, it does not look like change will happen in the immediate future.
One industry that has been hard hit by the pandemic is that of hosted events, seminars and exhibitions. By necessity these events bring together people who are in close contact with each other over a period of time. A requirement for seminars, product demonstrations and networking. However, because of the need to be socially distant, these types of events cannot take place in the current climate. This resulted in cancelled events. Including those planned for later in 2020 due to the uncertainty around lifting of restrictions and the inability to undertake necessary preparation now.
However, many event hosts are trying to make sure some element of their events can go ahead which is resulting in the innovative use of digital technology. Hosting lectures and talks electronically instead of attendees physically meeting in a seminar room. This is via a number of platforms such as Zoom. Distribution of documents for discussion or new ideas by email and PDF, instead of hard copies. Recording of presentations, or what would have been breakout sessions, by video and in slide show format to be distributed electronically, for viewing at the recipient’s leisure.
Most event hosts have to register for VAT in the country where their event takes place if they charge admission fees to attend it. This is because that income is subject to VAT where the event takes place. The only exception to this is when the event’s focus is charitable or educational/vocational and the host is a not-for-profit, or similar body (the rules on the exemption from VAT vary from country to country). Or if all of the supplies made can be subject to the domestic reverse charge (where the customer accounts for the VAT)
If event hosts make any of the changes described above the need to account for VAT as they have previously done so will disappear. This will be as a result of the nature of the supply they make changing. Instead of being a service of admission to their event, for VAT purposes it will take on a different characterisation.
We can characterise these new supplies as electronically supplied services if the provision of it is entirely automatic. For example, the product is online and then delivered to the recipient over an internet connection with no human intervention. However, where the delivery is not automatic the characterisation would be different. For example, charging for customers to watch or take part in a live online webinar/Q&A would not fall within the definition of an electronically supplied service for VAT purposes.
Impact for event hosts
If a business makes these changes and the delivery of the event now takes place differently; it is almost certain that there are new VAT reporting obligations. Making some old ones redundant.
In the first place, with no physical event happening the need to file local VAT returns will cease as there will be no VAT to declare. This could lead to a de-registration or the submission of nil returns. If a registration was obtained because invoicing occurred, and VAT charged to customers/accounted for to the tax authority it would be necessary to reverse this position. The issue of credit notes to customers would have to occur if the VAT treatment had changed, alongside amendments to the previously submitted returns.
If the event host makes electronically supplied services, determining the VAT treatment to apply is necessary. This depends on whether the recipient is in business or a private individual; and where they belong – determined by reference to all the facts at hand (who is the contract with, which party pays, etc). In some situations, it might be necessary to file MOSS returns which will require the business to put in place new procedures. It is important to understand the VAT rules for non-electronically supplied services. So it is clear as to where VAT is due and which party is required to report it.
Finally, it might not be possible to recover VAT on local costs via the local VAT return. This is due to the absence of local supplies. Instead, VAT recovery claims under the Refund Directive or the 13th Directive might have to be made instead. These have different time frames for submission; generally resulting in longer periods elapsing before the tax authority makes a payment. There can also be different rules on what VAT is recoverable for 13th Directive claims. The supplier may not be able to make a claim due to the requirement for reciprocity.
Has your business has made any of the changes set out above? Or is contemplating them? Then it is important to understand what that means. Key questions to ask and answer will be:
- How should I characterise my supplies;
- Where is the supply subject to VAT;
- How should I account for that VAT, do I need a new registration;
- What do my customers need to know and how much/what VAT should I charge them; and
- How can I recover my VAT costs?
Are you an events host and have a question about COVID-19 and VAT? Then please get in touch with our VAT experts. We’ll be happy to discuss what the COVID-19 VAT impacts are for your business and events.