The finance law for 2024 has announced significant modifications concerning the taxation of virtual events. These changes, which will take effect on January 1, 2025, will affect the determination of the taxable location for cultural, artistic, sporting, scientific, or educational services provided online.
New Taxation Rules
Starting from the effective date, the taxation of virtual events will no longer be determined by the location where the service provider is established, but rather according to the establishment location of the recipient, whether they are VAT registered or not. This change aims to harmonize taxation in the context of the globalization of online services and to reduce some of the administrative complexities that providers previously faced.
Two Billing Scenarios
For our clients, two distinct situations arise regarding billing:
Individual Client (BtoC)
If the client is an individual, the virtual service will be billed at the VAT rate of the consumer's country of establishment. This means that providers will now need to adapt to the local tax regulations of the countries where their clients reside, which may require adjustments to their billing systems.
Business Client (BtoB)
In the case where the client is a business, the virtual service will be subject to VAT according to the location of the taxable recipient. This provision will simplify billing for businesses since they will continue to be able to claim their right to VAT deduction.
Implementation of the New Rules
These new taxation rules will come into effect on January 1, 2025, but they will only apply to services provided after this date. This means that all services rendered before this date will continue to be subject to the VAT rules in place prior to 2025.
