VAT and the supply of tickets for major sporting events

Invitations and free tickets to sporting events handed out by companies (to employees, business associates or as part of sweepstakes) are very popular.

Not least due to the Olympic Games in France and even more so the European Football Championship 2024 in Germany, the associated tax issues, especially VAT, have once again come to the fore. Here, we provide you with an overview of the tax aspects relevant to tickets for sporting events in Germany, and focus on possible consequences for foreign companies that could result from the purchase of tickets and hospitality services.

Ticket Sales and hospitality services

1.    Taxability in Germany

The purchase of a ticket for a sports-event constitutes a service in the form of granting admission to a sporting event. This is taxable at the respective venue of the games and subject to German VAT. This is regardless of whether the service is provided to a taxable person (B2B-sector Sec. 3a(3) no. 5 German VAT Act – "UStG") or private person (B2C-sector, Sec. 3a(3) no. 3 letter a UStG).

2.    Reverse charge procedure

If tickets are sold by companies which are not based in Germany to another company or legal person, the reverse charge procedure applies (Sec. 13b (2) no. 1 in conjunction with (5) sentence 1 UStG) leading to the recipient of the service being liable for VAT. In Germany the reverse-charge mechanism also applies if the recipient is not a German resident or a VAT-registered company. This also applies if the tickets are purchased for purposes other than those of its business under Sec. 13b (5) sentence 7 UStG).

Consequently, the purchaser is obliged to register for VAT purposes in Germany and to submit proper VAT returns to the competent tax office.

3.    Definition and components of hospitality services

Hospitality services include more than just access to a sporting event. They comprise additional services such as catering, entertainment programs, special seating, and other exclusive amenities. This combination of services makes assessing the tax burden more complex.

Tax Challenges

1. Potential VAT registration obligations

If the right holder responsible for the supply of tickets for a sporting event in Germany (e.g., for the hospitality program) is based outside of Germany, the supply of tickets is subject to the reverse-charge mechanism if the recipient is a taxable or a legal person regardless of their residency and the reason behind why the tickets were bought.  

The VAT liability for the supply of these hospitality services is consequently moved to the recipient. This means the recipient must register for VAT purposes in Germany and declare the VAT for which they are liable (Sec. 13b (4a) sentence 1 UStG).

2. Input tax deduction

Taxable persons who purchase tickets or hospitality services are generally eligible to deduct the VAT paid as input tax if they use the services for business purposes and if they are used only for services not excluded from input VAT deduction. Should the company not be obliged to register for VAT purposes in Germany, it can deduct input VAT using the input-tax refund procedure. However, if the company must register for VAT purposes in Germany (e.g., due to the reverse-charge mechanism applying to the tickets purchased) it can generally deduct input tax by including the input tax amounts in its German (preliminary) VAT returns.

3. Free-of-charge supply of tickets to customers or employees

The supply of tickets or hospitality services free of charge can be considered a taxable service if the provision of the tickets is for purposes not involved with the business or for the private use of staff (Sec. 3 (9a) no. 2 UStG). This is also independent of whether input tax deduction was claimed.

Input tax deduction is excluded if the taxable person intended to give away the tickets or hospitality services to their employees free of charge at the time of service acquisition.

Taxation as a gratuitous value transfer does not apply if the transfer is for business reasons. This can be the case when the taxable person distributes admission rights to customers or business partners for business purposes. The input tax deduction on the incurred expenses is possible if no gift within the meaning of Sec. 4(5) sentence 1 no. 1 of the German Income Tax Act (EStG) is present. This is the case if the acquisition costs for all gifts given out to each of the beneficiaries do not exceed the total amount of EUR 50 per year.

4.   Raffles and competitions with (hospitality) tickets as prizes

Raffles and/or competitions are generally organised for purposes within the business. As a general rule, they are used to help bolster relations between the company and its customers. The distribution of (hospitality) tickets as the raffle prize free of charge ultimately does not constitute a taxable transaction under German VAT law, as this is a supply of service free of charge for business purposes. However, if raffle tickets are sold during a raffle but not given out free of charge, the supplies of these tickets generally qualify as taxable transactions.

Deducting input VAT from the purchase of the prize which is to be raffled is generally as general expenses possible if the raffle and/or competition is carried out for purposes within the company.

5.   Conclusion

The VAT treatment of ticket sales and hospitality services to sports events is a complex issue and requires careful examination and planning. Especially if it involves companies outside of Germany. Companies should familiarize themselves with the tax requirements early on and seek tax advice if necessary.  This ensures they fulfil their obligations and can utilize potential tax benefits. From the purchaser and the recipient’s point of view, nothing should stand in the way of an enjoyable event and subsequent positive memories. That way, everyone benefits.