Background
On 5 April 2022, the EU Council adopted the Directive 2022/542 which not only provides that the Member States (MSs) can apply the reduced rates to certain live-streamed activities but also confirms that from 1 January 2025, the supply of a virtual event is taxable in the country where the consumer resides or is established.
New place of supply rules for interactive virtual events
The changes apply for interactive online events and other live-streamed activities that do not qualify as electronic services.
For example, online events that are pre-recorded qualify as electronically supplied services and are subject to VAT in the country where the consumer resides or is established under the current VAT rules.
B2B or B2C
The events made virtually available or other live-streamed activities could be provided to either private individuals (or other non-VAT-registered persons – B2C) or to businesses (B2B).
B2C
The new rule applies to activities which are streamed or otherwise made virtually available. This means that new place of supply rules do not only apply to virtual events but to all live-streamed activities.
The virtual event will be subject to VAT in the EU MS in which the recipient of the services is established, has his permanent address or usually resides.
This means that the providers of such cross-border services must charge the VAT of the MS of their customers (the threshold of €10,000 applies to EU cross-border suppliers).
Consequently, when an EU business (who has cross-border pan-European sales above the threshold of €10,000) or a non-EU businesses (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.
OSS registration possible
Alternatively, the business could opt for online One Stop Shop (OSS). This means that businesses falling in scope of the new rules are not required to VAT register in each of the EU MS of their customers if they opt for OSS.
B2B
The new directive makes it clear that the rule applicable to in-person events does not apply to events “where the attendance is virtual”. Consequently, the main place of supply rule for B2B services (Article 44 of the EU VAT Directive) applies for virtual events.
This means that, in a cross-border 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 generally is in line with the current treatment of the virtual events.
Consequences of the change
B2C
The VAT treatment of the events provided to non-VAT registered persons such as private individuals will be considerably changed since the VAT of the MS of the customer should be charged under the new rules. This means that the businesses who have such cross-border activities may face new VAT registration obligations or should register for OSS (if not already registered).
B2B
The VAT treatment largely remains the same as under current rules, however, it is made clear that the place of supply rule which provides that certain B2B events are subject to VAT in the country where it takes place, does not apply to virtual events. This increases the legal certainty for taxpayers.
Several MSs have already changed their rules
The new rules apply from 1 January 2025. However, several MSs have already made steps to change the VAT treatment of the virtual events, e.g. by implementing circulars or policy decrees that include the new rules.
A possibility to apply reduced rates to live-streamed activities
The new Directive also includes a possibility for MSs to provide for the same treatment of live-streamed activities, including events, as those which, when attended in person, are 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”.
The developments in the Netherlands
In its reply to the Dutch Association of Theatres and Concert Halls regarding the applicability of VAT reduced rate on live streaming of performances and concerts, the Dutch Ministry of Finance said that it will not introduce the new reduced VAT rate for livestreaming of concerts and cultural events through a policy decree. It promised a letter to parliament outlining their overall views on the reduced VAT rate reforms first.
Practical implications
The above changes cause significant changes for VAT treatment of online events:
- Identify virtual events and other live-streamed activities (online conferences, webinars, trainings) that could be affected by the changes.
- Review the possible consequences and need for new registrations or an OSS registration.
- Find out what the consequences will be on your VAT burden, i.e. whether changes cause a reduced VAT rate to become applicable in various MSs).
- Analyze the impact on financial systems, contracts and invoicing.
