New place of supply rules for virtual events to apply as from 2025
New place of supply rules for virtual events to apply as from 2025
Virtual events such as online conferences, livestream lectures, on-demand training and live sports sessions became immensely popular during the corona virus pandemic. It is impossible to imagine everyday life without these offerings (which now have evolved into hybrid offerings in many cases), and this has not escaped the attention of legislators. Effective 1 January 2025, amendments to the EU VAT directive will introduce new place of supply rules for the supply of cultural, artistic, sports, scientific, educational, entertainment and similar events in the EU. Specifically, virtual events will be taxed in the country where the customer resides or is established instead of where the services are physically performed. The Dutch state secretary recently submitted a bill to parliament that would transpose the EU rules into domestic law.
Current VAT rules for virtual events and electronically supplied services
Cultural, artistic, sporting, scientific, educational, entertainment and similar events targeting private customers are currently taxed at the place where the services are physically carried out, regardless of whether the transaction is a B2B or B2C transaction. In many cases, this will be the country of the supplier.
Electronically supplied services in both B2B and B2C transactions, on the other hand, are taxed in the country where the customer is resident or established. The distinction between virtual services and electronically supplied services is not always easy to pinpoint—the determining factor is whether more than minimal human intervention is involved. Thus, for example, a service in which a person can watch a teacher live and can ask questions and interact will be considered an educational service, but if the service is a pre-recorded webinar in which it is not possible to ask questions, it is an electronically supplied service.
What will change?
The changes that will apply as from 2025 are most significant for B2C situations. Where private individuals are able to stream entertainment services and events or where such services/events are otherwise made available virtually, the place of supply will be the place where the consumer resides, is established or has their usual residence. The supplier will not have to register in and submit VAT returns to different EU member states for this purpose; it may elect to proceed with a single One Stop Shop (OSS) registration in the member state of establishment and submit VAT returns for the other EU member states through that country. As the application of the OSS scheme is voluntary, businesses can still choose to register for VAT in each country where it makes supplies if this is more advantageous.
To the extent entertainment services and events are streamed or otherwise made available virtually in B2B situations, the services will be taxed in the country where the customer is established. This means that in a cross-border situation, VAT liability will be shifted to the customer, who then will have to calculate and pay the VAT due to the tax authorities.
What actions can you take?
Although the new rules will not become effective until 1 January 2025, affected taxpayers may wish to consider taking the following steps now in order to prepare:
- Inventory all activities that may be affected by the new rules;
- Identify potential new VAT return obligations;
- Gather information that allows you to identify the location of your customers; and
- Consider whether your ERP system needs adjustments.
New issues
It should be noted that while the new rules will provide clarity and solutions, new issues also may arise; for example, how to deal with hybrid services (i.e., services that take place both physically and online). Physical entertainment services and events remain taxed in the country where the service is physically provided.
More information?
If you would like to know more about this topic, please contact one of our tax advisors. We are happy to assist you!