Conclusions from a 2019 ECJ ruling on event admission entitlement to taxable persons - BMF circular letter dated 9 June 2021

ECJ case: a professional association offered training only to members of the association and other professionals and only with registration and advance payment

A Swedish-based company owned by a professional association for accounting and payroll consultants offered courses to members of the association and others. Prior registration and prepayment were required for participation. The participants were exclusively taxable persons resident in Sweden, but some of the courses were held in other EU Member States.

The Swedish court referred the question to the ECJ to determine whether the accounting course was covered by Art. 53 of the EU VAT Directive (corresponds to Sec. 3a Subsec. 3 No. 5 of the German VAT Code) as the granting of the right of admission to events and thus taxable at the event location - also taking into account the fact that registration and payment were made in advance. Otherwise, the general rule on the place of supply (where the recipient of the supply runs his/her business) pursuant to Art. 44 of the EU VAT Directive (corresponds to Sec. 3a Subsec. 2 of the German VAT Code [UStG]) would apply. Insofar as the courses were held in other Member States, the two provisions result in different places of supply.

ECJ decision: special rule relating to event services to taxable persons applies here

The ECJ initially reiterated that the general recipient location principle does not take precedence over the special rules for determining the place of supply. Therefore, there is no reason to interpret the special rule for event admission in a particularly narrow manner. Moreover, according to the considerations underlying the EU VAT Directive, the taxation of a service should, as far as possible, occur at the place of its consumption.

In the specific case, the course’s place of supply was therefore to be determined in accordance with the special rule governing admission to events and was therefore in the respective Member State. The fact that registration and payment were made in advance was irrelevant.

BMF concludes that events do not have to be open to the public

In its letter dated June 9, 2021, the BMF refers to this ECJ ruling and amends the administrative guidelines to the German VAT Code as a result. The conclusion to be drawn from the ruling is that an event also falls under the special rule of Art. 53 of the VAT Directive/§ 3a Subsec. 3 No. 5 of the German VAT Code if it is not open to the general public. Although the ECJ had not explicitly stated this, the relevant course of the professional association had not been open to the general public. The advocate general had also argued in her opinion that general accessibility was irrelevant and also susceptible to manipulation.

The BMF also specifies in the circular letter that Section 3a Subsec. 3 No. 5 of the German VAT Code only applies to events in which the participants are physically present - i.e., not online events. This is also not derived from the ECJ ruling, but only from the opinion of the advocate general.

In practice, cross-border events are still uncertain territory

The BMF concludes from the ECJ ruling that Art. 53 of the VAT Directive and Sec. 3a Subsec. 3 No. 5 of the German VAT Code are applicable even if the event is not accessible to the general public. The reason is that the ECJ applied this provision even though the course in question was (only) open to members of a certain professional group - i.e., according to the BMF's interpretation, not to the general public. This interpretation is surprising, because in Section 3a.6 (13) Example 1 of the administrative guidelines in the previous version, the BMF had still considered a VAT seminar to be open to the general public even if, by its very nature, only a certain professional group participates. Since the ECJ did not address the criterion of general accessibility, however, no interpretation can be derived from the ruling.

With regard to the exclusion of online seminars, the BMF circular letter now offers more clarity, at least for German cases. With the restrictions mentioned, this also applies to the criterion of general accessibility. Taxable persons can refer to the amended administrative guidelines. However, it cannot be generally assumed that all other Member States will draw the same conclusions.

In practice, the scope of application of Sec. 3a Subsec. 3 No. 5 of the German VAT Code and the demarcation from Sec. 3a Subsec. 2 of the German VAT Code create numerous further difficulties. If the participants are also non-taxable persons, things get really complicated because then the applicability of Sec. 3a Subsec. 3 No. 3a of the German VAT Code must also be examined. The two provisions both refer to events but differ in wording.

In her opinion, the advocate general provides helpful suggestions for interpreting these and other issues, which the ECJ unfortunately did not address. Particularly interesting is also her statement that the issue of prior registration and/or payment is irrelevant. After all, in practice, it is far more difficult to determine the place where the recipient runs his/her business if participants do not register in advance.

Taxpayers can refer to the advocate general's arguments in the future, of course, but these are not binding on either the tax authorities or the tax courts.

For events in Germany that are organised by foreign entities and in which foreign taxable persons and non-taxable persons participate, there is a high level of scrutiny for VAT purposes. It is advisable to obtain the necessary information, e.g. tax status and, if applicable, place of residence or domicile, at an early stage - ideally using a standardised registration process.

The reverse charge procedure is excluded in accordance with Section 13b Subsec. 6 No. 4 of the German VAT Code for the granting of admission to trade fairs, exhibitions, and congresses in Germany. Foreign organisers wanting to  event of this type that is taxable in Germany must register for VAT purposes in Germany. However, not all event services under Section 3a Subsec. 3 No. 5 of the German VAT Code are subject to this exclusion from the reverse charge procedure. It is therefore advisable to check in individual cases whether the service recipient is required to register for VAT.

(Dated: July 26, 2021)