Foreign online event organizers can expect Hungarian VAT registration obligation from 2025!
From 1 January 2025, as a result of EU harmonization, foreign event organizers who arrange online cultural, artistic, scientific, educational, entertainment, sporting, or similar events for (among others) Hungarian private individual participants will be required to register for VAT purposes.
In the future, Hungarian VAT should be charged in these cases, meanwhile for participants from other countries, VAT should be charged at the respective local rates. For EU event organizers, it will be easier to fulfill the related obligations in the OSS system, but for third-country (e.g. UK, US, etc.) operators, it may be necessary to use a Hungarian fiscal representative.
Given that in the future, unlike the current rules, all online events will be fulfilled in the country of consumption, Hungarian online event organizers providing such services to foreign participants will be also affected by the new regulation.
As the change may result in multiple VAT registration obligation (if they are unable or unwilling to use the OSS simplification), the preparation should be started on time.
The new rules raise several questions, e.g. a double taxation situation could easily arise for 3rd country suppliers; it is also worth checking in advance whether the country of consumption has introduced a reduced rate for this type of service; and what impact the change will have on customer acquisition, contracting, and billing processes, etc. Another problem may be how to prove the "VAT exemption" during a tax inspection (e.g. by proving the "residence" of the participant) and what kind of services are covered by the scheme.
The regulation will enter into force next year, but the sector concerned must take steps this year to ensure that they can continue to operate in a compliant, risk-free, and cost-effective manner in the changed legislative environment.
The current regulation contains different place of supply rules for "traditional" (physical/in-person) events and online events. In addition, it should be also considered whether the recipient of the service is a company or a private individual and whether the service can be considered as an electronically supplied service for tax purposes. Depending on these criteria, the country of establishment of both the supplier and the recipient of the service, as well as the country where the event is held, may also be considered as the place of supply from VAT perspective. In the future, the place of supply for online events will be the "residence" of the participant, regardless of whether the participant is a company or a private individual.
The lack of transparent rules and interpretations (e.g. the ECJ ruling in Geelen C-568/17) has raised a number of questions.
Recently, for example, the ECJ has interpreted the content of such services from VAT perspective:
According to ECJ nr. C-532/22 Westside Unicat, the provision of "admission" to an event for entertainment purposes for VAT purposes can only be considered to be provided if the service is directly aimed at enabling the spectator to see the performance. Therefore, in the case at hand, the services provided by the video chat studio to the operator of the webcasting platform did not constitute the provision of 'access to an event', since in this context the possibility for the viewer to watch the event was not provided, and the general place of supply rule should be applied to this service.
Currently the complexity of the regulation and the lack of clarity are therefore making difficult the life of event organisers, but in the future, they may “pay” for simpler and safer regulation with additional administration burden.
VGD Hungary's compliance and tax advisory experts are at the disposal of event organizers to help them examine the relevant VAT rules and to simplify the administrative processes.
