CTAX Blog: VAT news for international associations holding events abroad.
The Italian authorities have further clarified the deduction rights of VAT on expenses. Expenses paid in 2017 must be claimed by April of the following year, but an exception is now granted for 2017 expenses that the invoice is received in the following year. For example, if an expense invoice is received 2018 you will have until the end of 2018 to claim the expense even though the expense is relevant to 2017. This obviously applies to very few transactions but could be useful in certain cases.
Due to a recent changed in Italian tax law, there is a new dealine to reclaim VAT paid out on expenses. From now on, VAT paid out during a calendar year will need to be claimed back before April of the next year. This nearl custs the deadline in half.
Authorities in Italy recently postponed the law that would have raised the VAT to 25%. The VAT increase is tied to the performance of the Italian economy. A VAT increase is still possible for 2019 and beyond.
As of January 1, 2018, the VAT rate is Switzerland will decrease to 7.7% and 3.7% for the reduced rate. Even if your event is scheduled to take place in 2018, sales until the end of 2017 will be subject to the current 8% VAT rate.
Over the years, I've heard this many times: "Why should I have to register for VAT in Germany for our annual congress? The revenue is collected in a bank account in the USA and we are a US-based association."
To answer, I always give a very simple example. Let's say I go to Japan and purchase a ticket to go see the recent Sky tree tower observatory. When the invoice shows the local consumption tax, I can't say: But I am based in the USA, I'm not liable for Japanese sales tax.”
The reality is that the service sold to me is rendered in Japan so Japanese sales tax will apply no matter who is purchasing the service.
Obviously, each country has its own set of rules on what else triggers the requirement to register or not for the local sales tax regimes. Some countries have a set threshold of yearly taxable sales, some don't even allow non-established entities to register and claim back any sales taxes.|
But to assume that your association's headquarters geographical location or where the revenue is deposited dictates the requirement to register or not, is simply false.
Since your association holds meetings abroad, you most likely face currency exchange issues. This depends on what currency you are invoicing participants with.
For example, if you collect registration revenue in USD running up to the event, you will need to remit the VAT on these sales to the local government. This payment has to be made in the local currency (EUR, GBP, JPY, etc.). Local suppliers for the event will usually be paid in local currency as well.
All this movement of money can incur costly currency exchange costs. There are a few possible solutions to this problem.
1. collect registration revenue in the local currency: This is the most obvious solution, but most often not the easiest as your local bank, credit card provider and such, might not be able to handle foreign currency transactions. If they do, they probably charge onerous sums for the service.
2. Collect part of the revenue in local currency: Some clients chose to collect sponsor and exhibitor revenue in the local currency. This creates a fund from which suppliers and foreign governments can be paid out with. Often the best way to do this is to open a bank account in the host country. The downside of this process is lots of red tape, forms, etc. to actually open the bank account. Keeping track of this foreign account can put an added burden on your staff as well.
3. Using an FX provider: Much like buying milk at the corner at a higher price out of well, convenience, letting your bank handle all your FX needs can seem convenient. The reality is that you are probably paying 50-150% more for the conversion costs. This amounts to a possible saving of 1 to 2 percent of the converted amounts. Needless to say, this can add up quickly.
Bottom line: Associations have a million things to take care of when holding an event abroad. Currency exchange might not be top priorities, but dealing with the right provider can ensure painless and consistent savings on all your FX transactions.
If you read online guide for VAT registrations from various sources, you can read that registration can take as little as a few weeks in some countries. This can be very deceiving, as in many cases offical documents such as certificates, certified identification documents, apostilles, etc, are required and can take weeks if not months to requests. For example, the IRS has a current turnaround time of just over 3 months to issue 6166 certificates.
So its best to plan ahead and start the process as early as possible.
This is the most common question that is asked to me. Obviously the answer isn't completely black and white.
To start, the requirement changes from one country to the other. Generally speaking, there are 3 categories:
1. Registration not possible: Some countries just don't allow non established entities to register for VAT. Some special incentive programs might be in place for professional meetings (such as in Cancun Mexico).
2. Registration possible but not required: Few countries fall under this rule. Japan for example requires registration based on the past two fiscal years if a certain threshold of sales has been met. So for one time events, registration isn't required. Obviously, if you aren't registered you generally can't claim the taxes back on expenses. Effectively, leaving money on the table.
3. Registration required. Most European countries and Australia require registration with or without a set threshold. Once registered your association will have to collect sale taxes on sales and will be allowed to claim back all the sales taxes paid out on expenses.
We can assist your association to determine the sales tax liabilities in a given host country so your board of directors or members can make an informed choice.
The Canadian authorities have modified the current tour package incentive program as of the 22nd of March 2017:
"Under proposed changes, a GST/HST rebate is no longer available to non-residents for the Canadian accommodation portion of eligible tour packages under the Foreign Convention and Tour Incentive Program if the accommodations are supplied after March 22, 2017. However, the rebate may still be available if the accommodations are supplied in 2017 and the amount owing for those accommodations is paid in full before January 1, 2018."
Accomodations sold by the conference organizer of an eligible foreign conference may still claim the taxes paid. Consult a tax specialist to find out how.
If you read around the web, it might seem like Italy will increase its VAT rate in 2018. The fact is the government has stated that it will increase the standard VAT rate from 22% to 25% on the 1st of January 2018. Despite this, the increase remains uncertain as past planed increases have been cancelled. We would advise caution and to be ready to for a possible change in early 2018.