The success of live streaming and the VAT/GST implications

With the ongoing pandemic, and the mass cancellation of live shows, new services have started to appear: the live streaming of shows where tickets are sold to customers all over the world for a single event. With this boom comes increased focus from tax jurisdictions and rules, especially those around the application of VAT/GST, are under review.

Originally, the VAT/GST treatment of the sale of tickets for events was based on where the event took place. When the EU VAT rules on digital services first appeared back in 2013 there was little focus on these rare types of services. 

Today, with the evolution of technology, such events have migrated online. The question now is whether such events are deemed to be digital services. 

The European Court of Justice (ECJ) had the opportunity to answer this question, in the Geelen case, but it failed. In this case (webcam services filmed in the Philippines for sale online in the Netherlands), the ECJ ruled that as the organiser and the recipients were all located in the Netherlands, VAT was due in the Netherlands. As a result, the ECJ left unanswered the question of whether the service should be considered as an electronically-supplied (or digital) service. 

Evolution of EU VAT legislation

However, EU legislation has evolved in this area, as it has in other tax jurisdictions. Indeed such services may be considered in the EU as Telecommunications, Broadcasting and/or Electronic (TBE) services with taxation at the location of the end customer. 

Such services may, in turn, be reported through MOSS (or OSS from July 1, 2021). In the EU, in order to be deemed a digital service then the service must be supplied without human intervention. This again raises the question of whether live streaming can be defined as a digital service. However, if the service is pre-recorded (i.e. not live) it does meet the EU definition of a digital service. When the service is live there is no interaction with the customers, and the question again must be asked: does this remove the service from the EU definition of a digital service? 

Recently, a proposal for a Directive amending the EU’s VAT rates has also included a much needed clarification of the VAT Directive with regard to the place of supply of admission to virtual and/or streamed events. This clarification means that, for example, live training or live events for which a consideration has to be paid in order to get access, would receive the following VAT treatment taking into account the place of supply:

For B2B: place of supply where the business customer is established (where the reverse charge mechanism applies)
 
For B2C: place of supply where the end customer is established. For such transactions, businesses may make use of the EU OSS (union and non-union) scheme in order to remit the VAT due
 

The situation in the rest of the world

In the other countries — such as Canada, New Zealand, GCC countries, Turkey, Taiwan, and Mexico (to name but a few) — the live streaming of events, and the sale of tickets for such events, is considered as a digital service and the digital platform is liable for VAT on the supply of this service. Such a service is likely to also be subject to US sales tax and, potentially, entertainment tax in certain US states.

Logically, such a VAT treatment is still based on the idea of levelling the playing field and applying consistent treatment no matter what way the service is performed (on-location or online).

This VAT treatment will simplify the analysis where, for such live streaming, there will be no distinction in the treatment of the live portion and the pre-recorded one. In reality, both types of service (live and pre-recorded) will likely be provided in the majority of cases. These service characteristics may create issues, e.g. if a ticket gives access to the live show and, also, to the recording.

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