Meeting Buyers To Benefit From EU Change To VAT Rule

Meeting buyers could benefit from a change to European Union rules on value-added tax treatment of overseas meetings that takes effect Jan. 1, 2011, the VAT specialist Meridian Global Services told EuroBTN on Tuesday. This will be particularly beneficial for corporate customers based outside the EU, such as in the United States, who no longer will be charged, and subsequently have to recover, VAT for meetings inside the EU.

However, Meridian also warned that many third-party event organizers have failed to understand the imminent changes, which could lead them to charge corporate clients mistakenly for VAT when they are not supposed to, and to cause errors in clients' accounting.

As the rules stand today, services related to conferences and events within the EU are subject to VAT in the country where the event takes place. This means that if, say, the event organizer and its corporate client are based in Ireland but the event is being held in Spain, the organizer will charge Spanish VAT to the client, which will then be obliged to subsequently recover it from Spanish authorities. It also means the Irish event organizer has to register for VAT in Spain, and so too potentially would the client if, for example, it is recharging the costs internally to other legal entities or to third parties.

Another disadvantage of the current regime is that some event organizers are mistakenly passing to corporate clients the VAT they incur on expenses in the country where the event is being held and also charging domestic VAT on top. "I have seen lots of cases of that over the years," said Paul Quigley, director of Meridian's international VAT consulting division.

Starting Jan. 1, event organizers no longer will be liable for VAT in the country where the event takes place, other than with regard to the collection of attendance fees. They no longer will be required to be registered in other countries either, and in some cases will be able to de-register.

Instead, VAT will be chargeable in the country where the client is based. In consequence, event organizers will not have to charge VAT to clients based outside the EU. If the client is in the same country as the organizer, then the organizer will charge domestic VAT and the client will recover the amount domestically, which is far simpler. If the client is based in a different EU country from the organizer, then the organizer will not have to charge VAT but must report the sale on an EC sales list.

Quigley said this will in some cases ease cash flow because VAT no longer will have to be paid and then recovered. However, he also warned that some event organizers, especially smaller ones, have not understood the changes and that meeting buyers need to familiarize themselves with the new rules to ensure VAT on their events will be treated correctly.

"Clients need to be aware that if they are dealing with suppliers who do not know what to do, the risk is the client will try to deduct VAT that should not have been charged in the first place," said Quigley. "They may find the deductions will be disallowed by the VAT authorities or even penalized. With the rules changing, there is an opportunity for companies to get things right."

As an example, companies often are not actually required to pay any VAT because of a mechanism known as reverse charging, but they fail to account for this correctly. Quigley warned that French VAT authorities charge companies as much as 5 percent of the notional VAT liability if they misstate their reverse charge accounting.