Tax Services / Leaflets April 2011

VAT guide to exhibition services in Germany Contents I.

The EU VAT system and German VAT law

II. Place of supply rules for exhibition services in Germany 1. Letting of stand space supplied as a single supply or together with ancillary services as a package 2. Supply of single ancillary services without letting of stand space 3. Admission fees and entrance charges III. When to charge German VAT and when to apply the German reverse charge procedure IV. Tax point rules in Germany – at what time to charge German VAT V. Refund of German VAT charged to exhibitors

I. The EU VAT system and German VAT Law The Council of the European Union is authorised to issue Regulations and Directives for all member states of the EU. While Regulations are binding and directly applicable in all member states, Directives are addressed to the relevant member states and still need to be transformed into national law. Whilst Directives bind the member states with regard to the result, which needs to be achieved, each member state may choose the form and method of compliance. The EU VAT system is regulated by a series of EU Directives which set out the basic framework for EU VAT. VAT legislation in each member state must comply with the provisions of EU VAT law as set out in the EU Directives, however, they allow member states some degree of flexibility in implementing VAT legislation. As member states have a certain amount of flexibility when implementing EU VAT Directives, differences may occur between the national law of the member states. A typical example is the implementation of the new place of supply rules for exhibition services. II. Place of supply rules for exhibition services in Germany Place of supply rules in EU VAT law have undergone comprehensive change with the implementation of the VAT package – a bundle of changes to EU VAT Directives which have to be implemented by member states from 2010 to 2015. These changes also have an impact on the place of supply rules for exhibition services carried out in a EU member state. As from 1 January 2011 the place of supply of services relating to fairs and exhibitions, including the supply of services of exhibition organisers, can either be taxable in the country where those activities are carried out or in the country where the recipient of those activities is established. Page 1 German-British Chamber of Industry & Commerce, Tax Services | Deutsch-Britische Industrie- und Handelskammer, Servicebereich Steuern 16 Buckingham Gate | London SW1E 6LB | Tel: +44 (0) 20 7976 4160 | Fax: +44 (0) 20 7976 4104 | Email: [email protected] | Internet: www.ahk-london.co.uk The German-British Chamber of Industry & Commerce is a limited company registered in England under No. 1016261, whose registered office is at the above address.

To understand the place of supply rules for exhibition services thoroughly it is necessary to divide typical services supplied in the course of an exhibition into three different categories. 1. Letting of stand space supplied as a single supply or together with ancillary services as a package Usually, exhibition organisers hire an exhibition hall for a certain period of time to run their exhibition. Stand space at the exhibition hall is then normally let to exhibitors. As incidental services such as supply of electricity or the cleaning of an exhibition stand are often supplied together with stand space as a package, it is crucial to determine the place of supply for VAT purposes. EU VAT directives state that exhibition services supplied to a business customer should be regarded as a business to business general rule supply and therefore deemed to be taxable in the country where the business customer is established. However, the EU VAT directives do not define the term ‘exhibition services’ and it is up to the member states to define which supplies are to be considered as ‘exhibition services’. According to German VAT law letting of stand space at an exhibition is only regarded as an exhibition service for German VAT purposes if at least three of the following ancillary services are supplied together with the letting of stand space as a package: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Example

supply of electricity, gas, water, telephone and fax lines, internet and loudspeaker for the stand planning and design of an exhibition stand as well as the assembling and dismantling of the stand letting of an exhibition stand and other parts like tables and chairs supervision of the stand with support staff and security cleaning of the stand letting of cloak rooms and locker rooms at the exhibition hall supply of general admission passes (in form of packages for customers) letting of telephones, fax machines and other communication devices at the stand letting of information systems such as screens or loudspeaker at the stand clerical work during the exhibition transport and storage of equipment to be used at the stand translation services during the exhibition advertising services such as listings in the exhibition catalogue or advertisement in newspapers marketing services for visitors preparation and organisation of forums, press conferences and special exhibitions

EXPO Ltd is an exhibition organiser based in London (UK). Once a year EXPO Ltd runs a trade exhibition in Berlin (Germany) and hires an exhibition hall in Berlin for a period of seven days. Prior to the start of the exhibition EXPO Ltd agrees with FAIRTRADE Ltd, a UK based retail business, to let stand space at the exhibition hall in Berlin. The letting agreement between EXPO Ltd and FAIRTRADE Ltd states that stand space can be used by FAIRTRADE Ltd for a period of five days and that together with stand space also an exhibition stand, electricity for the stand and certain advertising services such as banners around the stand will be provided by EXPO Ltd. Under German VAT law EXPO Ltd supplies exhibition services to FAIRTRADE Ltd as stand space is provided together with at least three ancillary services. Therefore the supply is deemed to be taxable in the country where the recipient of the services is established, provided that the recipient is a business for EU VAT purposes. As FAIRTRADE Ltd is a business based in the UK the services supplied by EXPO Ltd are taxable in the UK and not in Germany. The supplies by EXPO Ltd might be subject for UK VAT instead.

Page 2 German-British Chamber of Industry & Commerce, Tax Services | Deutsch-Britische Industrie- und Handelskammer, Servicebereich Steuern 16 Buckingham Gate | London SW1E 6LB | Tel: +44 (0) 20 7976 4160 | Fax: +44 (0) 20 7976 4104 | Email: [email protected] | Internet: www.ahk-london.co.uk The German-British Chamber of Industry & Commerce is a limited company registered in England under No. 1016261, whose registered office is at the above address.

German VAT law defines the letting of stand space together with less than three ancillary services as a supply of land related services rather than as a supply of exhibition services because the ancillary services are merely incidental to the main supply which is the licence to occupy space at the exhibition hall. As a result the place of supply for letting of stand space together with less than three ancillary services is taxable in the country where the exhibition is being held. Example

EXPO Ltd lets stand space during the exhibition in Berlin to another UK based business, WHOLESALE Plc. The letting agreement between EXPO Ltd and WHOLESALE Plc states that stand space can be used by WHOLESALE Plc for a period of five days and that together with stand space also an exhibition stand and electricity for the stand will be provided by EXPO Ltd. Under German VAT law EXPO Ltd supplies land related services to WHOLESALE Plc as stand space is supplied together with less than three ancillary services. Therefore the supply is deemed to be taxable in the country where the exhibition is being held. The place of supply is Germany, regardless of whether the recipient of the supply is a business customer established in another country.

2. Supply of single ancillary services without letting of stand space Exhibition organisers may also supply single ancillary services, such as letting of cloak rooms or supply of some clerical work, to business customers that do not require stand space for their activities at the exhibition. The place of supply rules for single ancillary services can vary depending on the nature of the supply. It is important to note that the supplies of multiple ancillary services to one customer are not considered to be exhibition services if they are not supplied together with stand space. Any ancillary services supplied without stand space have to be considered separately for determining the place of supply for German VAT purposes. Example

EXPO Ltd also provides single ancillary services to ROUSELLE Sarl, a French company based in Paris. ROUSELLE Sarl does not need to hire stand space from EXPO Ltd as they can use parts of an area hired by the French tourism board. However, EXPO Ltd provides ROUSELLE Sarl with an exhibition stand as well as with some screens and a speaker system which they can use for five days at the exhibition. EXPO Ltd supplies two different ancillary services to ROUSELLE Sarl. As there is no stand space let to ROUSELLE Sarl the two supplies will not be considered as exhibition services for German VAT purposes. The letting of the exhibition stand to ROUSELLE Sarl is regarded as a land related service and is therefore taxable where the exhibition is carried out which is Germany. However, the letting of screens and the speaker system is regarded as a general rule supply and is deemed to be taxable in the country where the customer is based which is France.

3. Admission fees and entrance charges Exhibition organisers normally also sell entrance tickets for the exhibition or charge fees for admission to certain events at the exhibition to the general public. EU VAT directives state that the place of supply for admission fees or entrance charges are deemed to be taxable in the country where the exhibition is carried out. The general rule for business to business supplies does not apply for admission fees and entrance charges. This rule also applies in Germany. In general, the admission to an exhibition or an event carried out in Germany is always taxable in Germany and will be charged with the standard rate of 19% VAT, regardless of whether admission is sold to businesses customers or private individuals.

Page 3 German-British Chamber of Industry & Commerce, Tax Services | Deutsch-Britische Industrie- und Handelskammer, Servicebereich Steuern 16 Buckingham Gate | London SW1E 6LB | Tel: +44 (0) 20 7976 4160 | Fax: +44 (0) 20 7976 4104 | Email: [email protected] | Internet: www.ahk-london.co.uk The German-British Chamber of Industry & Commerce is a limited company registered in England under No. 1016261, whose registered office is at the above address.

III. When to charge German VAT and when to apply the German reverse charge procedure As a basic rule, German VAT can only be charged if the place of supply of a service is deemed to be in Germany. The previous paragraph of this leaflet describes how place of supply rules for exhibition services in Germany have to be applied. This paragraph now describes in which situations German VAT has to be charged or the German reverse charge procedure has to be applied. According to German VAT law certain rules for charging VAT apply to overseas businesses trading in Germany. If a business not established in Germany supplies services to a German business customer the German reverse charge procedure always applies, regardless of the kind of service which is supplied to the German business. Example

EXPO Ltd is a UK based business and has no business establishment in Germany. It is therefore regarded as a nonestablished business for German VAT purposes. EXPO Ltd lets stand space together with a number of ancillary services to SCHMIDT GmbH, a German based company. The services provided by EXPO Ltd are regarded as exhibition services for German VAT purposes and are deemed to be taxable in the country where the customer is established which is Germany. Although the place of supply is Germany and the customer is a German based business, the German reverse charge procedure applies. EXPO Ltd issues an invoice without German VAT and state the German VAT-ID of the customer on the invoice.

A different rule applies where services are provided to business customers not established in Germany. Again, the crucial point to remember is that German VAT can only be charged when the place of supply of a service is deemed to be in Germany. The previous paragraph of this leaflet gives examples where services supplied in the course of an exhibition are deemed to be taxable in Germany. Taxable supplies in Germany carried out to businesses not established in Germany are always subject to 19% German VAT. Example

As stated in a previous example, EXPO Ltd lets stand space to WHOLESALE Plc, another UK based business without a business establishment in Germany. Because stand space is let together with less than three ancillary services, the supply is deemed to be taxable in the country where the exhibition is carried out which is Germany. As the place of supply is Germany and the customer is not established in Germany, German VAT of 19% has to be charged by EXPO Ltd to WHOLESALE Plc. EXPO Ltd must issue a VAT invoice which meets the requirements of German VAT law.

In certain situations the place of supply of services supplied in the course of an exhibition can be outside of Germany. In this case neither Germany VAT has to be charged nor the German reverse charge provisions have to be applied. However, because the place of supply is in another country, VAT rules in the country of supply may apply. Example

As in a previous example, EXPO Ltd lets stand space to FAIRTRADE Ltd, another UK based business without a business establishment in Germany. As stand space is let together with at least three different ancillary services, the supplies are deemed to be taxable in the country where the customer is established which is in the UK. As the place of supply is not in Germany, neither German VAT has to be charged nor the German reverse charge provisions have to be applied. The supply is taxable in the country where the customer is established and might be subject to either VAT or reverse charge in the country of supply. As both EXPO Ltd and FAIRTRADE Ltd are based in the UK this is treated as a UK domestic supply and UK VAT will have to be charged. Page 4

German-British Chamber of Industry & Commerce, Tax Services | Deutsch-Britische Industrie- und Handelskammer, Servicebereich Steuern 16 Buckingham Gate | London SW1E 6LB | Tel: +44 (0) 20 7976 4160 | Fax: +44 (0) 20 7976 4104 | Email: [email protected] | Internet: www.ahk-london.co.uk The German-British Chamber of Industry & Commerce is a limited company registered in England under No. 1016261, whose registered office is at the above address.

IV. Tax points rules in Germany – at what time to charge German VAT As described in a previous paragraph of this leaflet, German VAT is only charged in certain situations where services are supplied in the course of an exhibition to business customers not established in Germany or where admission fees are charged to the general public. Basically German VAT is not due to be paid to the German tax office when a VAT invoice is issued. Instead special rules apply for working out the time when a supply of services is treated as taking place – this is called the tax point. In general, the tax point for the supply of services is the earlier of the date when the agreed services are performed by the supplier or the date when payment for an invoiced amount is received by the supplier, whichever happens first. Example

EXPO Ltd has issued a German VAT invoice to WHOLESALE Plc in February 2011 for their services to be provided at an exhibition taking place in July 2011. WHOLESALE Plc paid the invoice amount to EXPO Ltd in April 2011. The tax point of the supplies provided by EXPO Ltd to WHOLESALE Plc is April 2011 because EXPO Ltd received payment for their invoice in April. The VAT amount charged to WHOLESALE Plc has to be paid to the German tax office by EXPO Ltd in April 2011, regardless of the fact that the services will only be provided in July 2011. WHOLESALE Plc can apply for a refund of the German VAT charged.

V. Refund of German VAT charged to exhibitors Where German VAT is charged to business customers that are not established in Germany, the VAT amount charged is generally refundable by the German tax office, subject to certain conditions. However, refund applications from European businesses have to be filed with the tax office in the country of their main business establishment which will then be forwarded electronically to the German tax office. VAT refund applications from non-European businesses have still to be filed directly with the German tax office. Example

WHOLESALE Plc, which has its main business establishment in the UK, received a German VAT invoice from EXPO Ltd for services carried out in the course of an exhibition in Germany. WHOLESALE Plc does not make any taxable supplies in Germany and has no business establishment in Germany. WHOLESALE Plc is generally eligible to apply for a refund of German VAT charged by EXPO Ltd. WHOLESALE Plc has to file the VAT refund application with HM Revenue & Customs which is the tax authority in the UK. The VAT refund application will be forwarded by HM Revenue & Customs to the German tax office which will then process the refund application and repay the VAT to WHOLESALE Plc.

You can obtain more information about current German VAT issues from: German-British Chamber of Industry & Commerce Tax Services Tel: +44 (0)20 7976 4160 Fax: +44 (0)20 7976 4104 E-mail: [email protected] Website: www.ahk-london.co.uk This leaflet contains general information and cannot substitute professional advice. Therefore no liability can be accepted for any loss or expense incurred as a result of relying on information provided in this leaflet. © German-British Chamber of Industry & Commerce. April 2011 Page 5 German-British Chamber of Industry & Commerce, Tax Services | Deutsch-Britische Industrie- und Handelskammer, Servicebereich Steuern 16 Buckingham Gate | London SW1E 6LB | Tel: +44 (0) 20 7976 4160 | Fax: +44 (0) 20 7976 4104 | Email: [email protected] | Internet: www.ahk-london.co.uk The German-British Chamber of Industry & Commerce is a limited company registered in England under No. 1016261, whose registered office is at the above address.