For businesses hosting a virtual event during Covid-19, VAT Consultant Thibaut Hubrecht discusses the VAT issues they need to be aware of.
During these unprecedented and fast-moving times, business innovation is key to survive the looming economic recession. The events industry is no exception. In an effort to tackle the rapid spread of the Covid-19, Governments worldwide are prohibiting large gatherings of people and events in general. So, as discussed in a previous post by former VAT director Rob Janering, events companies are turning to virtual events. However for any businesses hosting a virtual event, there are VAT issues they should be aware of.
More than a quick fix for the event industry
Virtual events can be provided from any location with a simple internet connection. They are accessible to everyone and comply with the social distancing rules by preventing direct contact between participants. More importantly they are economically viable – they generate revenues while keeping the level of costs low. As opposed to expensive physical events.
Event organisers offer services far beyond the usual admission to classic webinars. This is with the aim to make the experience as close as possible to a real physical event. For example:
- Sponsorship services under the form of logos and banners on e-ticket or websites;
- Virtual stands or symposium products and service showcases with live chats;
- Pop-up video during live event break and so forth.
Virtual events also provide the possibility of sharing content more easily with the attendees. Hosts record live events for the participants to download. Hosts also share speaker presentations through links or emailing customers directly.
Due to the current situation it is becoming clear that virtual events are more than just a trend. They can be considered a main stay in the future of the event industry. However, as often when commercialising new services, one of the challenges that these businesses will have to consider is the intricacies created by the EU VAT rules.
Physical event VAT rules
Admissions to physical event have their place of supply, and therefore taxation, at the event location. This exception to the general rule for services means that the event host has to register for VAT purposes in the Member State where the event was organised. This is in order to collect and remit the tax to the local Tax Authorities. This represents an additional compliance cost, since a VAT registration and VAT returns must be submitted on a regular basis until the end of the event. The supply of exhibition space usually follows the same rule, as a land related service. Generally only the B2B supply of sponsorship, as a general rule service, has its place of supply in the customer’s country of establishment.
Virtual event complexity
The scope of services that a virtual event host provides is wide (service, e-service, electronically supplied service etc.). However in most cases, when selling them to taxable persons, the general rule applies. For B2B transactions, this simplifies the VAT treatment greatly as no VAT registration in other Member Sates would be required.
Hosts will have to be more vigilant when selling such services to private individuals, or organisations without a VAT number. The first important consideration would be to review whether the provided service qualifies as an “entertainment” or “amusement activity”. The place of supply for the B2C supply of such services is the service provider’s country of establishment. The European Court of Justice confirmed this in its ruling (ECJ Case C‑568/17-Geelen).
The second consideration would be to identify whether the electronic services are provided with or without human intervention. In the latter case, since the place of supply is where the customer is located, the host might have to register for VAT purposes in a different Member State. This in order to charge local VAT. And while a registration for the Mini One Stop Shop (which allows the payment of the VAT due on electronically supplied services platforming one EU Member State for all Member States) could prevent businesses having to register in other Member States, specific conditions would have to be fulfilled first.
It’s also important to highlight that from the 1st of July 2021, the MOSS rules will be extended to all other B2C services. The EU delayed the extension of the MOSS to 2021, in part due to the ongoing Covid-19 crisis. From July 2021 onwards, the Union scheme for intra-EU supplies of TBE (Telecommunications, broadcasting & electronic services) services will be extended to all types of B2C services as well as to intra-EU distance sales of goods and certain domestic supplies facilitated by electronic interfaces. This important change of VAT reporting requirement will make for many businesses the transition to One Stop Shop platforms a necessity in the coming months.
In addition to the above, the uneven implementation of the “use of enjoyment rule” creates more complexity. The rule corrects instances of double taxation or no taxation when selling to taxable and non-taxable persons located in a non-EU country. Rules on electronic services might have also been implemented in the same Member States.
Review VAT Rules
It is essential that event companies review the VAT rules that would apply to the services they will provide. This is also relevant to other types of businesses organising virtual events in the near future.
Is your business hosting a virtual event and needs help with VAT? Then contact our VAT experts for further information on your virtual event and VAT obligations.