Just about anyone that has traveled outside the United States is aware of the Value Added Tax (VAT) imposed by other countries. Like our sales tax varies from state to state, VAT varies a little from country to country. However, the overall system is a little more complicated as anyone doing business in Europe would know, but the European Union (EU) has tried to make it less so in recent years.
Starting in January of 2011, some additional changes were made. Associations do fall under different criteria so it is really important that anyone planning meetings in Europe is very much aware of the rules and regulations. VAT can amount to some large sums which must be accounted for in the meeting budget and knowing what countries are owed the taxes is extremely important.
In order to help everyone understand the latest VAT changes, I have included the article below that Anne-Sophie Snyers, Director Finances, in our MCI Brussels Office wrote. This article first appeared in the current issue of Headquarters magazine, a UK based publication.
The VAT Package 2010-2011: Review of services and treatments within the EU
Good or bad news for the Associations?
By Anne-Sophie Snyers, Director Finances, MCI Brussels Office
The VAT Package has been delivered a year ago already, after almost 10 years of discussions between the 27 European Union Member States. But what is the VAT package exactly about and how does it impact associations and Professional Congress Organisers?
The VAT Package: General Rules and Exceptions
In the past, there were many discrepancies between the places of supply rules across the European Union, leading to double taxation risk for companies and associations. This was especially the case for management services.
Since 2010, apart from the exceptions listed below, services provided to other businesses (B2B*) such as management fees, memberships to companies are taxed in a uniform way in the country where the customer is established.
At the same time, these services are covered by a reverse charge provision, obliging business customers to report the VAT due if the service provider is not established in their Member State, through a European Declaration of Services (EDS).
On the opposite, services provided to non-business clients (B2C*) such as membership for individuals are located where the service provided is established or where the establishment is based from where the services are provided.
GENERAL RULE AS FROM 2010
B2B- place of supply of service = CUSTOMER place (reverse charge system)
B2C- place of supply of service = SUPPLIER place
On these two general rules for locating services, a limited list of clearly defined exceptions still applies.
- Hiring of vehicle:
- Short term (< 30 days): taxed where the vehicle is put at the disposal of the customer
- Long term (> 30 days): taxed where the customer is established
- Transport of good: The B2B rule applies in any case.
- Fairs and exhibitions:
Until the end of 2010, all services linked to fairs and exhibitions were taxable where the services were physically carried out.
As from 2011, more distinctions need to be made:
- Services in respect to admission to fair and exhibitions (registrations fees) will be located where the event actually takes place
- Other services relating to fairs and exhibitions (audio visual location, translation services, etc…) will be located where the customer is established if the customer is a taxable person/where the activities actually take place for non-taxable person
- Passenger transport, supply for cultural, artistic, sporting, scientific, educational, entertainment and similar services, restaurant and catering services
All these services are taxable where the services are physically carried out.
The Impact of the VAT Package on the Organisation of Congresses
The two last bullet points have a clear impact on the organisation of congresses, fair, and training courses undertaken by Associations, and a clear study needs to be done when building up the budget of any event.
Although the goal of the VAT package is deemed to facilitate the future, it though leaves rooms for interpretation and adaptations that could feed this new regulation in the years to come.
Indeed, the fees paid by delegates could actually not be seen as “admission fees” for all participants– and therefore subject to local VAT – as it involves much more than the mere admission to an event. The participation fees to a congress are linked to the access to documents, website, networking, etc.… Hence, the B2B rule (and reverse charge) could be applicable to the companies registering its employees; the B2C for individuals should still apply. This would though complicate the role of the association and the Professional Congress Organiser (PCO) organising an event.
Furthermore, the wording: “other services relating to fairs and exhibitions…” could lead to misinterpretations. Some EU States might translate differently with a limited or broader approach.
However since this new rule must apply, here is what it means for an association that wants to organise a congress or an event:
- The local VAT registration is still mandatory for any event organised by an Association and registrations will be submitted to the local VAT
- Most of the charges linked to the organisation of the event (Food & Beverage, transfers, cultural activities, social programmes…) will still be charged with the VAT of the country where the event takes place – see section about exceptions
- Some other charges will now be exempted from the local VAT and the reversed charge will apply (for example audio visual and translation costs). This relates to any service linked to the organisation and not mentioned in the exceptions
- Exhibitions: the general B2B rule applies. However, some exceptions remain in EU countries which should be checked on a case by case basis
- Sponsorship: the local VAT is applicable depending on the nationality and if the sponsor is a company/association or a private.
The new VAT Package is a vast topic and there is much more to say about its impact on the associations’ live, such as the functioning of the EDS, local reclamation for foreign VAT paid outside a congress via the Electronic Refund platform.
However, and despite the many seminars and courses offered on the topic, associations should ensure they get the best advices on the matter, and by professionals to prevent from unpleasant consequences.
*B2B (Business to Business) = any company/association being VAT registered
B2C (Business to Customer) = any individual/company/association not being VAT registered
No question understanding the VAT tax and accounting for it when planning your international events is very important to the success of your meetings. Hopefully, this article will help you be prepared in advance for your next European meeting.