VAT On Virtual Events And The Legacy Of The Pandemic

By Daniel Voica

The pandemic completely disrupted the events sector and led to an almost complete shutdown of in-person events for a long period of time. Thankfully, the technology that facilitated work from home also helped replace in-person events with virtual ones. While this was a great opportunity to still bring people together, from a VAT perspective, things turned out to be somewhat more complicated because virtual events do not have a rule of their own when it comes to determining the country where VAT becomes due like in-person events do.

In the first article of a two-part series, we consider the complex area of cross-border VAT for events and conferences in a post-pandemic world with a focus on existing EU rules and guidance.

In the second part we will touch on the changes that are coming into force on 1 January 2025, along with the challenges and complexities we expect the events sector will have to face. But, before we dive into the finer points of these rules, we will provide a brief overview of the basics of EU VAT for events.

What are the general EU VAT rules?

Under the EU’s VAT rules, in order to determine where a service should be taxed, a number of principles have to be applied. Most services will follow a so called “general rule” while a smaller number will fall under exceptions to the general rule. There is a general rule for services provided to business customers (B2B) and another general rule for customers not in business (B2C). These rules state the following:

• B2B services should be taxed in the country where the business customer is established.
• B2C services should be taxed in the country where the supplier is established.

When determining what rule should be applied (either the general one or an exception) we start by checking if the service in question falls under any of the exceptions as these are usually very specific and have a narrow application. If that is the case then we follow the rule mentioned in the exception. If no exception is applicable then we have to apply the general rule.

How does the above apply to events?

Charging a fee to allow someone to attend an event in person is a service that falls under a specific exception to the general rules mentioned above. The exception says admission services have to be taxed in the country where the event effectively takes place, regardless of where the event host or the attendee are established. This means that, for example, a UK business holding an event in Germany will have to charge German VAT to a French client that is not a business. This exception was introduced in order to simplify the rules since applying the general rule in this case would have led to a number of complications.

There is of course the possibility that a VAT exemption could also apply if the event is of a certain nature (e.g. educational events might be VAT exempt), in which case potentially no VAT should be applied, despite the place of supply rules.

But when the pandemic started and lockdowns were introduced, all these considerations were no longer useful since in-person events no longer took place and were replaced by virtual events livestreamed over the internet.

What VAT rules apply to virtual events?

A typical set up for a virtual event involves a speaker in front of a webcam livestreamed over the internet to attendees from all over the world. In most cases, the speaker could also interact with his viewers and answer any questions they had live.

In cases like this the VAT treatment will be driven by the nature of the service provided by the event host. In other words, the nature of the event (i.e. what the speaker says) and the type of clients paying to view the stream will be the important factors in determining the VAT treatment. This often leads to the service falling under the general rules which means attendance to a virtual event would be taxed either in the country of the customer (when the customer is a business) or in the country where the event host is established (if the customer is not a business).

On the other hand, if someone couldn’t join the livestream (or didn’t want to) and paid instead to receive access to recordings (and usually other content from current or past events) then the general VAT rules do not apply.

Why?

Because usually receiving access to a library of recordings or other type of electronic information changes the nature of the supply.  It is seen as a digital service with minimal or no human intervention, i.e. you pay a fee and receive access almost immediately, and there is no interaction with the provider of the service.

Where this is the case then it will be deemed to be an electronically supplied service.  These services have their own separate rules for VAT purposes which essentially say the supply should be taxed where the client is established (as presumably that is where the services are also used and consumed). Unfortunately, there are some exceptions here as well and working out where the client is established can be quite tricky with extensive rules that need to be followed.

Inevitably, switching to virtual events and streaming everything during the pandemic led to businesses, and as demonstrated below, not just events businesses, getting tangled in the web of legislation and rules around place of supply. In several cases, the European Court of Justice was asked to shed light on how some of these streaming rules should be interpreted and the findings were useful.

The European Court of Justice weighs in on the existing rules

Before the pandemic virtual events were quite rare since the norm was to travel and attend in-person.  As such the VAT rules mentioned above had never really been tested in court. With the pandemic and the rise in streaming it was only a matter of time before the above rules ended up causing an issue.

There were two cases that dealt with streaming service and their VAT treatment, and while not specifically events industry related, drew very similar comparisons to the streaming of live events: Geelen (C-568/17) and Westside Unicat Case (C-532/22). Both cases relate to streaming of adult content (which for some reason, became very popular during lockdown!)

In Geelen the European Court of Justice had to weigh in on whether Mr Geelen, a Dutch established and VAT registered taxable person should have charged local VAT on supplies of live interactive erotic webcam sessions to clients in the Netherlands. The models that were hosting the live sessions were based in the Philippines but were employed by Mr. Geelen.  They were communicating with their clients on the live streamed sessions and taking special requests from them. (One model would be interacting with a number of clients on the live stream).

Aside from the adult nature of the content, the above setup is strikingly similar to that used by companies that host virtual events. Essentially, one speaker discussing things from his area of expertise in front of a webcam and the stream broadcasted live to an online audience with the ability to take questions and interact with viewers in real time.

The case is quite technical but the takeaway from it is in Mr. Geelen’s case is that the services (entertainment) should be taxed where the supplier is established rather than where the models or the clients were located. This was a very important confirmation of how the rules should be applied and gave legal certainty around whether to charge VAT or not to those that were providing entertainment services to consumer clients. This was a positive development to the adult streaming industry but a blow to tax authorities’ ambitions of taxing the supplies in the country of the consumer.

In the Westside Unicat case, models in Romania were providing their services to Westside Unicat (a Romanian studio) which in turn was livestreaming them to a US business (Streamray USA Inc). The terms and conditions for end customers (private individuals engaging with the models) were set by the US business.

No VAT had been charged by Westside Unicat to the US business on the grounds this was a B2B supply of services, but the Romanian tax authorities disagreed. They took the view that based on the Geelen case VAT should have been charged by Westside Unicat because in the eyes of the authorities, entertainment services should be taxed where the supplier of such services (Westside Unicat) is established, namely in Romania, even though they were not the party setting the terms and engaging with the end customer.

The European Court of Justice disagreed however and ruled that the B2B supply by Westside Unicat to its US client was a general rule service and therefore not subject to Romanian VAT.

Again, disregarding the adult nature of the supply, the above case seems to suggest a virtual event that is being broadcasted by an event host to another business will just follow the regular B2B place of supply rule (assuming it doesn’t fall under any other exception or exemption of course).

Overall, the above two cases provided more certainty to tax payers on how the rules should be applied but were not welcomed by tax authorities. Almost immediately after the judgement in Geelen came out, the European Commission and the Member States decided the rules should be changed as the findings of the Court were not in line with their view of how the rules should apply. This will be discussed in more detail in our second article of the series.

Events businesses are already burdened by complex VAT law since the supplies they make can cover multiple exceptions to the general VAT place of supply rules.  Live-streaming events and making them available to download after the event adds to this complexity, and careful planning is required to ensure that VAT is accounted for correctly.

In our second article of the series, we will touch on the changes that are expected to take place starting 1 January 2025 along with the challenges and complexities the event sector will have to address.

Get in touch

At Essentia we have a wealth of experience in working with companies in the event sector and would be very happy to help navigate the complex world of VAT and help businesses prepare for the 2025. We can help determine if VAT is due on supplies, where supplies need to be taxed, what type of information needs to be collected from attendees generally ensure event organisers and event hosts are prepared for the upcoming changes.