|Tax rules in the Federal Republic of Germany have until now required that companies that participate at our trade shows be subject to the country’s 19% value-added tax (VAT), based on the fact that the goods and services provided were of German origin. That is to say, VAT was charged by Messe Duesseldorf because of the location that the services were rendered.|
The thought process was thus: A foreign company that participates at a trade show in Duesseldorf must pay the VAT for its exhibit space and/or space-bundled services, then afterward process a refund either itself or by working with a reputable VAT Reclamation Agency.
An expensive proposition to be sure. Exhibitors have had to front an additional 19% on top of their trade show participation costs for the past four years. This was always a bit of a hard pill to swallow, especially for American companies used to state and local sales taxes ranging between 0% (Delaware, New Hampshire, Montana, Oregon) and 9% (Tennessee).
Now comes some welcome news: German tax authorities have announced that effective January 1, 2011 VAT on trade show packages will now be based upon the location where the recipient (i.e. exhibitor) is based and not on the location where the services were rendered.
In a nutshell: US-based exhibitors no longer have to pay an additional 19% on their invoices issued by Messe Duesseldorf.
As an exception, however, visitor entrance tickets will still include VAT, as will most "a la carte" orders undertaken directly with independent trade show suppliers and vendors. Further information about this can be found on the website of the Taxation and Customs Union of the European Commission.
For exhibitors based in Germany, the calculation of the VAT and their tax obligations and procedures remains unchanged.
Don’t consider this tax advice, rather a description of the changes underway. Be sure to consult your tax advisor for specific information how these changes may affect your organization!