2011 has brought with it a change to the German place of supply rules for event-related activities. If supplied to business customers, such activities are taxable at the recipient's place of business. In accordance with the European VAT Directive, it will only be in respect of the admission to an event that the place of supply will remain where the event takes place. Due to this new differentiation the term admission to an event" needs to be analyzed.
Admission to events
In reaction to the amendment of Art. 53 of the European VAT Directive, "the place of supply" rules for supplies carried out to business customers for events have changed. These new rules became effective in Germany as from January 1, 2011. Only with regard to the right of entry to events will the place of supply rules remain unchanged. Therefore, the question arises as to how the scope of "admission to an event" should be determined.
1. Previous regulation
Until December 31, 2010, supplies in connection with events were taxable in the country where they were actually rendered regardless of whether they were supplied to a business customer (B2B) or to a private individual (B2C). Besides cultural, artistic, scientific, educational, sporting and entertainment supplies, similar supplies, including the majority of the supplies carried out in connection with fairs and exhibitions, were also defined as supplies in connection with events according to sec. 3a para 3 no. 3 lit. a of the German VAT Act. The admission to events fell within the scope of this provision. This meant that German VAT had to be charged to all attendees and exhibitors if the event took place in Germany, regardless of where the country of the organizer was located and of whether the attendee/exhibitor was a business or a private individual.
2. Future regulation
2.1 Supplies to private individuals (B2C)
The VAT treatment of supplies in connection to events will remain the same in 2011 where the said supplies are carried out to private individuals. These supplies are taxable where they are actually rendered (sec. 3a para 3 no. 3 lit. a of the new German VAT Act). This means that the organizer still needs to be registered for VAT in Germany regardless of where they are located and that they are required to charge German VAT to private individuals attending the event.
2.2 Supplies to business customers (B2B)
As of 2011, supplies to business customers and corporate bodies which do not carry out a business but which have been provided with a VAT identification number will no longer fall within the scope of sec. 3a para 3 no. 3 lit. a of the German VAT Act. Therefore, the principle place of supply rule applies, i.e. services in connection to an event are taxable where the recipient is established (sec. 3a para 2 of the Ger-man VAT Act). This means that German VAT should only be charged to companies located within Germany, and not to companies located outside Germany. However, as of 2011, a new provision will enter into force (sec. 3a para 3 no. 5 of the German VAT Act). According to this provision, the admission to events granted to business customers will still be taxable where the event takes place. This means that German VAT still has to be charged to all the attendees, regardless of whether they are a business or a private individual and regardless of in which country they are located. The back-ground for this exemption from the principle rule is a practical one: the organizer of an event would otherwise have to determine, at the moment he sells an entry ticket, whether the purchaser is a business customer or a private individual.
2.3 Admission to events
In the future, the organizer of an event would, however, have to ask himself the question whether the supply he carries out would qualify as admission to an event" in this respect. If not, the differentiation as to whether the recipient is a business customer or a private individual, would again be relevant for the VAT treatment of the supply.
In Germany, the question whether a supply would qualify as "admission to an event" has not, to date, been subject to discussions so far. Also, the preamble to the new VAT provisions as of 2011 does not define the term "admission to an event".
However, the term has been subject to discussion between the EU Member States. Because of the amendment of Art. 53 of the European VAT Directive, the European VAT Committee has raised the question of how "admission to an event" should be defined. The discussion led to a decision which can be found in the European VAT Committee's working paper no. 604, dated January 27, 2009.
From a German VAT perspective, the outcome of the discussion is surprising. Only in case of walk-in customers should the granting of entry qualify as admission to an event in this respect.
According to the European VAT Committee, a supply would not qualify as admission to an event where the participation fees for a seminar or a conference have to be paid in advance and if otherwise the participation would be denied. In these cases, the customer's focus does not lie with the permission of entry to certain premises but on the participation in the conference or the seminar. The permission of participation would, in this case, qualify as an educational service. Therefore, it would fall within the scope of the principle place of supply rule for business customers as of 2011 and would be taxable at the customer's place of business. This would mean that local VAT should not be charged to businesses located in another country. However, local VAT would still have to be charged to private individuals regardless of in which country they are located.
As described above, the differentiation between business customers and private individuals would again become relevant.
For reasons of practicability and legal certainty, Germany has apparently voted against this restrictive understanding of the term "admission to an event" via the European VAT Committee. This means that Germany has decided that "the place of supply" for all admissions to events, including the participation fees for a seminar or a conference is where the event physical-ly takes place. Consequently, German VAT still has to be charged to all attendees if the event or conference takes place in Germany, regardless of whether the attendees are from a business or are private persons, and regardless of the country where they are located.
In addition, it can also not be concluded from Art. 36a of the Proposal for a Council Regulation laying down implementation measures for the European VAT Directive (17760/09 FISC 190) that only in the case of walk-in customers would the granting of entry qualify as admission to an event.
3. Invoices issued in advance
Where invoices have been issued in 2010 for events not taking place until 2011, they must be in accordance with the VAT provisions in place in 2010, i.e. considering the place of supply where the services are actually rendered. Where the advance invoices have been issued to a business customer and do not concern the admission to an event, an amendment may be-come necessary because of the change of the place of supply rules for event-related services.
Organizing an event is quite a complex issue from a VAT perspective. New uncertainties could arise due to the differing understanding of the term "admission to an event" within the EU. Unless there is a common clarification, the legal situation in the respective Member State should be checked. From a German perspective, the term "admission to an event" should not be used restrictively. Apparently, the German tax authorities are going to issue a circular clarifying the remaining doubts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.