Determining the place of supply for VAT on online events has always been a controversial issue. Since participation in such events is done via the internet, it is possible that the event organiser and the participants are located anywhere in the world. This circumstance creates an additional complication for the determination of the VAT applicable to these services.
In those cases where the recipient of the service is a taxable person for VAT, it is first necessary to determine whether the fee for accessing to such an event falls under the general place of supply rule (Article 44 of the VAT Directive), which would mean that the event organiser should not charge VAT to the recipients established in other EU member states.
Or whether, on the contrary, the special place of supply rule applies (Article 53 of the Directive) which states that access to scientific, entertainment, educational or similar events should be taxed for VAT where the event takes place.
In such a case, the organiser of the event must charge to the attendees the VAT rate applicable at the place where the event takes place. The latter would only be the case if such events can be considered as an ‘event’.
In cases where the recipient of the service is not a VAT taxable person, it will also be necessary to determine whether the general place of supply rule applies (Article 45 of the Directive), which would mean that the organiser of the event should charge VAT in the country where he is established. Or, on the other hand, the special rule applies (Article 54 of the Directive), meaning that the access to these events must be taxed, as in the previous case, where the event takes place.
The VAT Committee agreed that this type of service should be considered as ‘events’ as long as their duration is not excessive (one week is given as a guideline). In other words, the longer the duration, the less likely it is to qualify as an ‘event’.
Secondly, it will be necessary to determine whether the fee paid for participating qualifies as ‘access’ within the meaning of Articles 53 and 54 of the VAT Directive.
The CJEU has pointed out that participation in an event of this nature is closely linked to access to it, so that the amount paid for participating in it must also be considered as ‘access’ which means that the special place of supply rules (Articles 53 and 54 of the VAT Directive) should apply.
Thirdly, we must also analyse whether the above conclusions are distorted by the fact that the event is online, rather than face-to-face. There is no clear answer and so far was necessary to interpret judgments made in this respect (e.g. CJEU, C-568/17, L.W. Geelen).
The surprise came on December 7 when the Ecofin meeting agreed to modify the structure of VAT rates. In the proposal to amend the VAT Directive, a modification to Articles 53 and 54 of the Directive was included unexpectedly, expressly stating that these articles will not be applicable "where the attendance is virtual". This would mean that the taxation for VAT of these events should be as follows:
If the recipient is a taxable person, the general place of supply rule applies. This will imply in practice that the supplier does not have to charge VAT to his customer when both are established in different member states.
Where the recipient is a private individual, the proposed new wording of Article 54 states that taxation will be in the member state where the person accessing the service is established or domiciled, with the supplier being obliged to charge the corresponding VAT to his customer.
According to the above, the system of taxation at destination is generalised. In case of business-to-consumer (B2C) supplies, since a reverse charge system cannot be applied, suppliers could make use of the OSS returns.
An additional complication may even arise in cases where a hybrid event takes place. That is, attendees may attend in person or join online. In this case, the service provider may need to differentiate between one type of attendee and the other. For face-to-face attendees, the normal VAT rules would continue to apply, while for online attendees the new rules described would apply.
If definitively approved, this will be an important step forward in the taxation of this type of activity, which has become commonplace in recent years. It is also a step in the right direction towards establishing a common framework for the taxation of the digital economy.
Fernando Matesanz
Managing director, Spanish VAT Services
