Event VAT issue: A non-resident event management company organises an event in Hungary
Let’s see what a foreign event organiser needs to bear in mind when the event requires personal presence and takes place in Hungary.
Pursuant to the Hungarian VAT Act:
- The place of supply of services in respect of admission to cultural, artistic, scientific, educational, entertainment, sporting or similar events, such as fairs, exhibitions and presentations, and of ancillary services related to the admission, supplied to a taxable person, shall be the place where those events, fairs, exhibitions and presentations actually take place.
- The place of supply of cultural, artistic, scientific, educational, entertainment, sporting or similar events, such as fairs, exhibitions and presentations, and of ancillary services related to the admission, performed for a non-taxable person, shall be the place where the services are physically carried out.
VAT issues of B2B events – the ordinary VAT system and reverse charges
In the case of an event in Hungary, the place of supply of tickets to taxable persons ("B2B", i.e. business to business) is domestic and the transaction is subject to Hungarian VAT.
As a general rule, the transaction is subject to the ordinary VAT system, but reverse charge may be applied if the customer is registered for VAT in Hungary and the taxable person supplying the service is not established in Hungary. For example, if a Dutch company only sells tickets to an event in Hungary to taxable persons who are registered for Hungarian VAT, the Dutch company does not need to register in Hungary because it can apply the reverse charge rules for invoicing and the customer will declare, pay and deduct Hungarian VAT.
Event VAT rate and tax exemptions in Hungary
As a general rule, sales of tickets for an event are subject to the 27% VAT rate. Exceptions to this the VAT tax on event tickets rule are cases where an exemption can be claimed, e.g. an exemption for education. However, in all cases, the exemption must be interpreted restrictively and on the basis of strict conditions.
VAT issues of B2C events - Where are event tickets subject to sales tax?
Business-to-consumer, or "B2C", ticket sales are considered to fall under the special rule for services to non-taxable persons for VAT purposes and the place of supply is where the service is actually carried out.
For example, if a Dutch event management company that is not established in Hungary but organises an event here: must charge Hungarian VAT on the price of tickets to non-taxable participants. To do so, it must enlist in the Hungarian VAT registry or register in its member state of establishment (the Netherlands) through the OSS system, then declare and pay the Hungarian VAT. This way the company it can avoid Hungarian VAT registration if not obliged to do so for another transaction.
Invoicing issues for a foreign event organiser – when does VAT registration become due?
Please note, however, that if the company is obliged to register for VAT and issue invoices under its Hungarian tax number, the online invoice data reporting obligation arises for all invoices issued under the Hungarian tax number. An exception to this is invoicing through the OSS system, which for a Dutch company means Dutch OSS registration and B2C invoicing under Dutch rules. This is because companies may register in the OSS system in the member state of establishment.
In certain cases, a domestic event may involve incoming or outgoing invoices where the place of supply is subject to the general rules on the supply of services and therefore it is not Hungary.
For example, if a Dutch company provides advertising space for taxable persons at an event, the place of performance is determined by the place of establishment of the service recipient and the invoice must be issued under the Dutch tax number, according to Dutch rules.
On the incoming side, i.e. when invoicing for VAT on costs incurred in connection with the organisation of an event, all invoices must be checked to ensure that they are correctly issued to the foreign organiser and that no special rules apply in relation to the determination of the tax rate, place of supply or person liable for the tax.
Hungarian VAT incurred by the foreign company in the course of the event organisation activity, if the foreign company has a Hungarian VAT registration obligation, can be deducted through the Hungarian VAT return.
However, the partial and total restriction on deduction for certain items (e.g. food, drinks, parking, etc.) regulated by the Hungarian VAT Act should be considered. In addition, the possibilities for exemptions from the deduction ban should be examined.
When no VAT registration obligation arises – tax exemption & refund
If the foreign company is not subject to domestic registration and is established in the European Union, it is possible to claim back Hungarian VAT through the International VAT Refund Claim Procedure by submitting the relevant form in the member state where the company is established.
As can be seen from the above, there are a number of factors to be considered in connection with a Hungarian event of a non-resident company, from the VAT registration and tax liability to the invoicing and declaration of transactions and the recovery of the VAT content of the costs incurred.
VAT Compliance Services for event organizers – from registry to reclamation
The RSM VAT Advisory team has an extensive portfolio of foreign event organisers and is happy to assist clients with the above issues, among others:
- transaction mapping,
- establishing the correct tax treatment, including whether an exemption may apply based on the content of the event
- if necessary, to carry out VAT registration and file VAT returns,
- reclaiming any VAT incurred.