As more services are moving towards the digital realm, VAT treatment is constantly changing to ensure it adapts accordingly. Recent VAT updates concern the VAT treatment for attending and hosting virtual events. Is your business compliant? Catch up with the compliance curve and learn everything you need to know about the new place of supply rule and how it affects your business.
New place of supply rules have been clarified for interactive virtual events. In essence, these changes apply to all interactive virtual events or alternative live-streamed events that do not qualify as electronic services. The change means that the VAT treatment of virtual events will be aligned with the VAT treatment of electronically provided services.
So how does the changed place of supply rule impact your business? Here's what you need to know to ensure compliance.
The Place of Supply rule and virtual attendance
Physical events, like conferences and seminars, are known to be taxable in the applicable EU member state where the event takes place. However, virtual events have been trickier to navigate as physical presence is separate from a specific EU member state. Establishing a VAT treatment proved challenging for local tax authorities and courts.
However, on 5 April 2022, the EU Council adopted Directive 2022/542, which confirms the VAT treatment of live-streamed virtual events. The directive confirms that starting from 1 January 2025, the supply of virtual events is taxable in the country of residence of the consumer or where the consumer is established.
Compliance with the proposed changes regarding the place of supply
Regarding VAT purposes, live virtual events no longer classify as an electronically delivered service. This is because live virtual events generally require human intervention. Delegates are generally allowed to ask questions in real time, and this human element excludes the possibility of it being classified as an electronically delivered service. Thus, virtual events require their own VAT treatment regarding the place of supply.
Pre-recorded events can still qualify as an electronically supplied service and are subject to the VAT in the country where the consumer resides under general VAT rules.
However, the new rule applies to virtual events streamed or made virtually available, and VAT treatment differs depending on whether it is supplied as a B2C or B2B transaction.
The virtual event will be taxable for EU VAT purposes where the recipient of the services is established. Therefore, the host will charge VAT according to the attendee's location.
The implications of the change:
In terms of B2C transactions, activities that are streamed or otherwise made virtually available, the place of supply will be where the customer is established.
The new directive states that the rule for in-person events does not apply to events "where the attendance is virtual.” Therefore, the principal place of supply rule will apply to virtual events. In a cross-border transaction, no VAT will be charged. In this case, the service provider will apply the reverse charge mechanism. Subsequently, the recipient will be required to self-assess the VAT due in its individual local VAT return.
The implications of the change:
VAT treatment largely remains unchanged. However, the place of supply rule for in-person events does not apply to virtual events.
Transition to the new VAT treatment
Member states are required to publish and adopt new laws by 31 December 2024. This includes successfully making administrative provisions for the new rules to come into effect from 1 January 2025.
For non-EU businesses supplying virtual events
The new VAT treatment in the EU concerning virtual events may significantly impact non-EU businesses that focus on supplying virtual events. From their perspective, many VAT legislations stipulate that these types of services are taxable where the event is hosted. Consequently, if VAT is now also taxable in an attendees resident country, this could lead to double taxation.
Ensure compliance with VAT experts in your corner
For your business to comply with the latest updates regarding VAT taxable on virtual events, you must be informed throughout the changing process and adapt your services accordingly. To avoid non-compliance and to stay ahead of changing legislation, it's always better to be backed by experts in the field.
Take care of your VAT compliance so you can focus on growing your business without increasing your exposure.