EU Throws a Virtual Party: New VAT Rules Unveiled for Your Liveliest Online Events!

Are you logged into the latest change in place supply rules for live virtual events? No worries, we're connected! As the economy further digitizes, there has been a significant shift towards virtual events, training sessions, and conferences. So much so that the novelty has worn off and is considered a part of everyday business operations. 

However, what's less obvious is the VAT treatment and legislative framework around virtual activities. 

Not for long, though. 

Here's what you need to know regarding the EU's decision towards the growing need for a legislative framework on the VAT treatment of virtual activities.

Background

The lack of clear rules regarding virtual events and business activities has been the focal point of many discussions and debates over the past few years. It has also resulted in many interpretations across the EU regarding the place of supply. Finally, this uncertainty reached a pinnacle point during the 2019 ruling of the Court of Justice of the European Union in the Geelen case (C-568/17). 

Yet still, the subsequent issuance by the EU VAT Committee of Working Paper 1013 and guidelines did not remove all ambiguity. Therefore, the most recent rules aim to clarify and harmonize the rules for online events within the EU, specifically the intricacies regarding the place of supply rules for online events. 

New place of supply rule

In brief, the new place of supply rule intends to implement and achieve correct taxation within the jurisdiction of consumption. This means applying tax where the supply is consumed. In practicality, this clarifies that for virtual events within a business-to-consumer (B2C) context, the place of supply will be where the non-taxable person attending the event is established. 

This will take effect from 1 January 2025. Note that this extends to situations where such activities are streamed or made virtually available.

For virtual events in a business-to-business (B2B) context, the place of supply will be where the customer is established according to the general place of supply rule for B2B services. 

The recent clarifications confirm that virtual events are explicitly excluded from the particular place of supply rule for events in article 53 of the EU VAT directive, according to which events are taxable where the event physically takes place. Deviations from this rule may still occur by application of the so-called "use and enjoyment rules" in national VAT legislation.

Implications for providers of online events

These changes could impact how virtual events are taxed starting January 2025 - yikes! For events outside the EU, there might be clashes between these new rules and the event's country rules, causing double taxation. Companies might also need to dig into their customers' country rules to see if there are different tax rates or exemptions for things like educational events.

What’s more, is the fact that these new rules could mean companies must register for taxes in all EU countries where attendees are located.

Navigate the new rules before having to play compliance catch-up. We’re here to help!