Spotlight: Sponsorship and VAT
Since there is no Legal text, the sponsorship can be
defined as a financial contribution to a cultural, artis-
tic, sporting, scientific, educational, entertainment or
similar event in exchange for acknowledgement that
will increase the notoriety and possibly improve the
image of the sponsor.
Sponsorship gives significant exposure to the spon-
sors’ targets, visitors and exhibitors, often profession-
als in the same field and, thus, potential clients.
Corner stone of the funding of an event like a con-
gress or a conference or a corporate, the sponsorship
is thus very important for financing the annual budget
of a not-for-profit Association.
While the annual memberships ensure some income
to keep the not-for profit associations alive, the in-
come of the events has a significant importance in
helping them achieve their goals.
What about VAT?
For Value-Added Tax (VAT) purposes, a ‘supply of ser-
vices’ shall mean any transaction which does not con-
stitute a supply of goods (EU Directive).
The sponsorship is a commercial operation. More spe-
cifically, it is a supply of advertisement services pro-
vided by the organizer of an event to the company
contributing to the organization of the event.
BC&A
Then, the question is: where shall the sponsorship be
taxable?
For sponsors with a business status (B2B)
According to the European regulations in force, the
general rule for the services applies whether the busi-
ness sponsoring an event is European Union based or
not. It means that the place of supply of the sponsor-
ship shall be the place where the sponsor has estab-
lished his fixed business receiving the said supply of
services.
However, if those services are provided to a fixed es-
tablishment of the sponsor located in a country other
than the one where he has established his headquar-
ters, the place of supply of those services shall be the
country where that fixed establishment is located.
To simplify, the sponsorship is most of the time sub-
ject to VAT in the country where the sponsor is estab-
lished.
When the sponsor is not established in the country of
the organizer, VAT is not charged and the sponsor self-
accounts the VAT in his country of establishment. This
is called the Reverse Charge Mechanism. It means that
there is no amount of VAT applied on the sponsorship
invoices issued by the organizer.
For instance, the organizer is established in Belgium
and the sponsor is VAT registered in Germany. The
German company has only an establishment in Germa-