Article written by Olivier Comment
The COVID-19 situation drastically changes the business especially within the frame of events. Since physical events are now forbidden, some organisations consider to adapt the set-up of the event to comply with the current measures by implementing a virtual event instead.
In addition to the practical challenges linked to the switch from the physical to the virtual event, the companies need to consider also the VAT consequences as the change has major impact on the VAT implications.
Without entering into details, in case of physical event, the registration fees will be subject to the VAT where the event takes place. Typically the registration fees are collected since long time prior to the event. Now when you decide to cancel/ change the format of the event you will typically need to deal with the following questions:
- Is it possible and what needs to be done in order to reclaim the VAT already paid to the VAT authorities (finance considerations)
- Is it necessary to send for each participants a credit not ? (administrative considerations)
- Are the authorities reluctant to refund the VAT ?
And after having the above mentioned answers / visibility, you finally decide to organise the same event but on a virtual basis. Here you really should anticipate the consequences because :
- Does the organisation of virtual congress result into provision of digital services or is the virtual event linked to sufficient level of human interaction due to which this qualifies as a standard service using internet as mean of communication? (VAT technical considerations)
- This will have major Impact on the place of supply and consequently on the administrative burden resulting from this event for the organiser.
- In case of general services no additional VAT registration should be needed ( B2B subject to reverse charge by the recipients/ B2C subject to VAT at the place of establishment of the organiser)
- In case of digital services, you should however anticipate potential multiple registrations and how to mitigate this point ?
- Re-think globally the event and the tax consequences because switching from physical to virtual impacts drastically the implications.
Even if those are just first/ high-level thoughts, I hope that it will help you to anticipate and consequently to:
1) Avoid risk of reassessment linked to underestimated VAT assessment
2) Mitigate the administrative burden;
3) Improve cash flow by obtaining the refund of the VAT already paid;
4) Think if multiple registrations are mandatory and how to avoid / improve;
5) Take into consideration the budget / finance point of view (including ERP requirements – how to handle multiple VAT rates and how to document the establishment of the recipient)
With the COVID-19 situation, organiser may need to think out of box in order to maintain the event. However, please consider the switch globally in order to avoid that the good idea becomes a nightmare.
Let’s don’t make the same mistake as some countries did in the COVID -19 situation : Anticipation is key!
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