One aspect of global projects that can be challenging to clients and supply-side providers is the Value Added Tax or VAT.  A value added tax (VAT) is a form of consumption tax.  From the perspective of the buyer, it is a tax on the purchase price paid by the consumer.  From a seller’s point of view, it is a tax only on the “value added” to a product, material or service – often levied at multiple stages of manufacture or distribution.

VAT was introduced in 1954 by the French Tax Authority although a German industrialist first proposed the idea in 1918.  Since then it has grown across many countries throughout the world, not just the EU, and has become a primary source of income for those countries.  Interestingly, the Canadian GST and HST is a type of VAT and the United States is one of the few nations in the world that does not have a VAT.  As a percentage, EU VAT rates can be as high as 25% (17%-20% are fairly common) and although end consumers, our clients, can apply to have VAT refunded it is a lengthy process and is muddied by a wide variety of factors including vendor registration in the country where an event is taking place, which can be costly to entities like Freeman.

From a practical perspective, if your client is looking to exhibit at a tradeshow in Berlin, Germany, where the VAT rate is 19% and their budget is $200,000 USD, then a full $38,000 USD may need to be set aside for this tax!  The previous laws applied to rental and purchase transactions.

Simply put, EU countries, with some exceptions, are no longer requiring American companies, like Freeman, to charge VAT to our American customers on rental items.  Additionally, if we are being charged VAT by our subcontractors it may be eligible to be reclaimed by Freeman (no longer burdening our client & job costs) provided certain invoicing protocols are followed.  This means that at worst, VAT becomes a cash-flow issue as opposed to impacting our profit AND no longer hinders our ability to be competitive in most EU markets.  Please note that Switzerland is not a member of the EU so these rules do not apply.

Our clients’ budgets are feeling immediate relief and their sales and marketing objectives are getting a B-12 shot as a greater percentage of spend is now being applied to creating a meaningful, engaging experiences.

VAT is a challenging topic even for experienced exhibitors and it can be downright intimidating and treacherous for the inexperienced.  However, with the right partner and subject matter experts, this beast can become both tame and predictable.

For more information on Freeman’s Global competencies, click here or email me at John.Eissler@Freemanco.com.

Danke! Merci! Gracias!

-John Eissler is Director of Sales, Global at Freeman