The European Council on April 5, 2022, adopted new place of supply rules for certain virtual services in its Directive 2022/542 to clarify the value-added tax treatment of virtual events.
New measures
The new measures apply from Jan. 1, 2025, and the changes apply for interactive online events and other live-streamed activities that do not qualify as telecommunications, broadcasting, and electronic (TBE) services. This will include various cultural, educational, entertainment, or similar activities provided via the Internet. The VAT treatment of these virtual events/live-streaming services will be aligned with the VAT treatment of TBE services. This means that from 2025 the supply of a virtual event will be taxable in the country where the consumer resides or is established.
Although the new rules apply from Jan. 1, 2025, several EU countries have already made steps to change the VAT treatment of virtual events, for example by implementing circulars or policy decrees that include the future EU VAT rules applicable from 2025.
Events made virtually available or other live-streamed activities could be provided to either private individuals/other non-VAT-registered persons (business-to-consumer (B2C)) or businesses (business-to-business (B2B). The VAT rules determining the place of supply from 2025 for both B2C and B2B services are explained below.
Business-to-consumer. Activities that are streamed or otherwise made virtually available will be subject to VAT in the EU country in which the recipient of the services is established, has their permanent address, or usually resides.
This means that the providers of such cross-border services must charge the VAT of the EU country of their customers (the threshold of €10,000 applies to EU/Northern Ireland (NI) cross-border suppliers).
Consequently, when an EU/NI business (who has cross-border pan-European sales above the threshold of €10,000) or a non-EU business (no threshold applies) provides cross-border virtual events or other live-streamed activities to non-VAT registered recipients located in the EU, the supplier becomes liable to register for VAT in all EU MSs where it has customers. Alternatively, providers of such virtual services could register for the EU's one-stop shop (OSS) and pay VAT via this single registration.
This means increased compliance costs for businesses providing such B2C virtual services. Providers of virtual events / livestreaming need to be able to identify the locations of their customers since they need to charge the VAT of the country of their customers. Furthermore, businesses not only need to acquaint themselves with the VAT rules of the countries of their recipients to comply with the VAT regulations of all those EU countries but also keep themselves updated with VAT rates and rules of their customer countries.
Business-to-business. The updated EU VAT Directive https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32006L0112 makes it clear that the rule applicable to in-person events does not apply to events “where the attendance is virtual.” Consequently, the default place of supply rule for B2B services (article 44 of the directive) applies to virtual events.
This means that in a cross-border B2B situation no VAT will be charged, and the service provider will apply the so-called reverse charge mechanism. Subsequently, the B2B recipient will self-assess the VAT. This means that the implications for providers of B2B virtual events will be less significant.
Practical Implications
Business-to-consumer. The VAT treatment of events provided to non-VAT registered persons such as private individuals will change considerably, as the VAT of the EU customer’s country should be charged under the new rules. This means that businesses that have such cross-border activities may face increased compliance obligations if they, e.g., should either VAT register in the countries where their customers are residing and remit payable VAT to local authorities or they should pay VAT via the OSS.
Business-to-business. The VAT treatment largely remains the same as under current rules, however, it’s made clear that the place of supply rule which provides that certain B2B events are subject to VAT in the country where they take place does not apply to virtual events. This increases the legal certainty for taxpayers. The reverse charge will apply to cross-border situations and service providers don’t need to register for VAT in all countries of their business recipients since the VAT obligations will be taken care of by their business customers who account for VAT in the country of their establishment.
A possibility to apply reduced rates to live-streamed activities
The EU VAT Directive will also provide a possibility for preferential VAT treatment to live-streamed activities, including events. This will mean that the virtual events will be eligible for the same VAT treatment as events attended in person. Virtual activities will also be eligible for reduced rates. This includes “admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events as well as sporting events and facilities or access to the live-streaming of those events or visits or both”.
Planning Points
The above changes have a significant impact on the VAT treatment of online events especially those provided to B2C customers, and suppliers of such virtually provided services should:
- Identify virtual events and other live-streamed activities (online teaching, conferences, webinars, virtual attendance of classes, training, concerts, museums, shows, theatres, and sports events).
- Identify where their customers are located and where VAT becomes due.
- Review the possible impact and need for new registrations or an EU one-stop-shop (OSS) registration.
- Find out whether any preferential treatment applies to virtual activities such as a reduced VAT rate.
- Find out what the consequences will be for their VAT burden.
- Analyze the impact on systems, contracts, and invoicing.
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