Online activities: Where do you need to pay VAT?
Online activities: Where do you need to pay VAT?
Many activities that previously were undertaken in person now take place online. Common examples include distance learning, concerts, museum visits, entertainment, etc. When these activities take place in person, VAT is due in the country where the customer physically receives/enjoys the service. But where is VAT due when online activities take place?
The important factors in determining where VAT is due are the type of service being provided and whether the recipient is a business or a private individual. This article looks at the VAT consequences of the online provision of cultural, artistic, sporting, scientific, educational, entertainment and similar activities. (It should be noted that new place of supply rules for the supply of cultural, artistic, sports, scientific, educational, entertainment and similar activities will apply in the EU as from 1 January 2025, i.e., such events will be taxed in the country where the customer resides or is established instead of where the services are physically performed (for prior coverage, see the tax alert dated 5 September 2023).
business, special place of supply rules only apply if access to an event is granted.
Cultural, etc. services B2C
In a situation where online entertainment services are provided to consumers, the Court of Justice of the European Union (CJEU) ruled in the Geelen case in 2019 that the place where the service is physically provided is the place where the organizer of the service is located. The customers in the Geelen case were also located in the country of the service provider. The question is therefore whether the same conclusion would be reached if the recipients are located in other countries. There have already been situations where the tax authorities have taken a different position. The VAT Committee has also taken a different position from the CJEU.
Cultural, etc. events B2B
The CJEU issued a decision on 23 November 2023 (Westside Unicat) that involved the place of supply of services connected to the admission to online events where the recipient of the services is a business. According to the CJEU, access to the event is granted only if an entrepreneur organizes the content of the event and provides access to it. Thus, an operator who merely provides the content to another operator who then provides event access does not fall within the special scheme for events. Only the later operator does. The services of the first operator will therefore be taxable in the country where the customer is established if the customer is a business. If access is provided to the content, the service is taxable where it is physically carried out. Again, it is unclear where the service is taxed in that situation following the Geelen case and later developments mentioned above.
The important factors in determining where VAT is due are the type of service being provided and whether the recipient is a business or a private individual. This article looks at the VAT consequences of the online provision of cultural, artistic, sporting, scientific, educational, entertainment and similar activities. (It should be noted that new place of supply rules for the supply of cultural, artistic, sports, scientific, educational, entertainment and similar activities will apply in the EU as from 1 January 2025, i.e., such events will be taxed in the country where the customer resides or is established instead of where the services are physically performed (for prior coverage, see the tax alert dated 5 September 2023).
Electronically provided services
First of all, the type of service provided is important. If there is no interaction and the service is automated and provided over the internet, it is an electronically provided service. The place of supply of electronically provided services is the place where the customer is established or lives. If the supplier is a business not established in the customer's country, the supplier can reverse charge the VAT liability to the customer (i.e., make the customer liable for the VAT). If the customer is an individual, the supplier is liable for the VAT. If the supplier is not established in the EU Member State of the customer, it can declare the VAT in its own EU Member State or – if it is established outside the EU – in an EU Member State of choice through the One Stop Shop system.Cultural, etc. services
If there is interaction, there is no automated service and the service provided is unlikely to qualify as an electronically provided service. The place of supply of cultural and similar services is the place where they are physically carried out. If the service is provided tobusiness, special place of supply rules only apply if access to an event is granted.
Cultural, etc. services B2C
In a situation where online entertainment services are provided to consumers, the Court of Justice of the European Union (CJEU) ruled in the Geelen case in 2019 that the place where the service is physically provided is the place where the organizer of the service is located. The customers in the Geelen case were also located in the country of the service provider. The question is therefore whether the same conclusion would be reached if the recipients are located in other countries. There have already been situations where the tax authorities have taken a different position. The VAT Committee has also taken a different position from the CJEU.
Cultural, etc. events B2B
The CJEU issued a decision on 23 November 2023 (Westside Unicat) that involved the place of supply of services connected to the admission to online events where the recipient of the services is a business. According to the CJEU, access to the event is granted only if an entrepreneur organizes the content of the event and provides access to it. Thus, an operator who merely provides the content to another operator who then provides event access does not fall within the special scheme for events. Only the later operator does. The services of the first operator will therefore be taxable in the country where the customer is established if the customer is a business. If access is provided to the content, the service is taxable where it is physically carried out. Again, it is unclear where the service is taxed in that situation following the Geelen case and later developments mentioned above.