EU - Introduction of New Taxability Rules for Virtual Events

With the increased number of virtual events, concerts, training sessions, and conferences in the past decade, a need for clarifying the complex rules on whether the place of taxation of these virtual events should follow the general place of taxation rules or should follow the rules specific to electronic services appeared.

The ECJ, with decisions in two separate cases, ECJ Case C‑568/17 (Geelen) and ECJ C-532/22 (Westside Unicat), decided that the general place of taxation rules should apply. On April 5, 2022, the European Council adjusted the VAT treatment by adopting Directive 2022/542 (Directive), shifting the VAT treatment for virtual events. 

These new rules are set to come into force on January 1, 2025.

What Are the New Rules as of January 1, 2025?

The adjustments made by adopting Directive 2022/542 mainly focus on the place of supply rule for virtual events. From January 1, 2025, VAT on virtual events, such as cultural, artistic, scientific, educational, entertainment, or similar activities, will be taxed at the rate where the consumer resides or has a permanent address (B2C).

However, Member States can apply reduced VAT rates to certain live-streamed activities. These rules bring live streams and online events aligned with the rules on electronically supplied services.

These new rules bring significant challenges and administrative burdens for businesses that, up until now, did not have to charge VAT in EU Member States for these supplies. Businesses will also have to determine the customer's location, including collecting data such as IP addresses and other digital indicators to ensure proper VAT charging.

The obligation to charge VAT for supplies to EU consumers, coupled with the need to pay attention to applied VAT rates, will significantly impact business operations. Furthermore, these businesses will face situations where some EU Member States have different VAT rules for certain regions or parts of their territories.

Regarding B2B transactions, the directive clarifies that events regarding these transactions are subject to the place of supply rule, where the VAT is charged through the reverse-charge mechanism.

Conclusion

Starting January 1, 2025, businesses should charge VAT based on the consumers' location for B2C transactions. One way businesses involved in B2C transactions could manage these requirements is to register for the One Sto Shop (OSS) system, which will allow them to settle VAT in multiple countries through a single registration.

Source: Council Directive (EU) 2022/542