Navigating VAT and tax challenges in international markets

Being so used to requirements in our home countries, we can fall into the trap of assuming that our systems are what everybody has. This article is a reminder that it is not the case. And although some countries don't have VAT, you can see that many do. 

VAT is a consumption tax applied to goods and services, with rates varying significantly across countries. For example, VAT on services in France is typically 20%, while in Portugal, rates can reach 23%. To complicate matters, regional variations within countries, such as Madeira and the Azores in Portugal, add another layer of complexity. 

As Laurent Gerard, Chief Financial Officer​ of MCI Benelux​, says, “Value added tax in Europe is totally unavoidable and it is important to know that VAT is based on national legislation, which of course make things even more complex as the rules and the obligations are different on a country per country basis.” 

“And every country with VAT regulations has a different VAT regime, and different VAT percentages and levels. The challenge really is to anticipate and to make sure you know the legislation and how to overcome that,” adds Jeroen van Liempd, Director Engagement, Associations & Communities ​at MCI Brussels. 

VAT has real implications for associations that go global. It is a complex issue that can not only impact your association’s bottom line, but creeps into everything from logistics management to global publication sales. As Laurent says, “Accurate VAT management enables organisations to reclaim about 70 to 80% of VAT paid on supplier invoices. If it is not done well, the reclaims will be lost, which will of course impact the profitability of the event and of the activity of the association.” 

When running events or activities in Europe, offshore-based organisations face several VAT-related challenges: 

• Registration requirements: Organisations must obtain a VAT number as a "non-established organisation" in each country where they operate, or work with an agency that is already registered. This requires separate VAT registrations for each jurisdiction.
  
  “The principle rule is that the regime for VAT applies where the activity takes place,” Jeroen explains. “If you are holding an activity in Switzerland, your customers outside Switzerland would declare the VAT in their own country, and they can apply for what we call ‘the reverse charge rule’. So in that case, the VAT does not apply. In terms of live virtual events, as of the 1st of January 2025, the customer pays the VAT level where he or she is residing. To facilitate this, the EU has created a single portal so that all these VAT declarations go through a one-stop-shop portal.” 
   
• Tax exemptions: Some activities, such as memberships, may be exempt from VAT. However, exemptions differ by country and depend on the activity type and size. 
   
• Reporting obligations: VAT declaration frequencies vary – monthly in some countries and quarterly in others – necessitating meticulous compliance.

For organisations new to international markets, working with local experts is the most effective strategy. Laurent notes that “VAT registration as a non-established entity takes up to three months. Unless the offshore-based organisation has a tax establishment in the country, the easiest way is to work with an agency or consultant that has a VAT number and runs the VAT management on behalf of the organisation.” 

Agencies or tax consultants with VAT expertise can also manage VAT registrations (if you wish to become registered) as well as declarations and payments on behalf of your organisation. This ensures compliance and allows associations to reclaim VAT on supplier invoices, reducing net expenses for activities like events. 

“Working through an agency gives you the VAT number when you need it and not afterwards when you don’t need it. And on top of that, the VAT management is done by the agency on your behalf,” says Jeroen. 

VAT consultants can also define the appropriate VAT regime based on the activity type, revenue, expenses and stakeholders involved. This upfront planning minimises risks and avoids penalties, which can be applied retroactively for up to seven years in some jurisdictions. 

It’s important to realise that complying requires a lot of planning and can’t be managed on a DIY basis by a small team. Whether you decide to handle it internally or work with an agent, the most important focus should be on documentation.  

John Sekel, Associate Vice President, Finance, Association Solutions​ with MCI USA, has worked with a number of US associations that have expanded into Europe. He says that planning and attention to invoicing systems was the reason one client’s VAT strategy was such a success: “This healthcare group kept highly detailed records of all costs incurred to host the event, as well as all cash receipts related to the event. They went above and beyond to ensure they were buttoned up from a documentation perspective.” 

An important tip to note for simplifying VAT compliance is to use one bank account for all transactions. “For each activity/event, all revenues and payments must be handled through the same bank account. The VAT number and management is linked to a specific bank account," warns Jeroen. "VAT that one pays on expenses can be claimed back up until the amount of the VAT that has been collected through revenues, for example registration fees. If you collect VAT through one bank account, and pay your expenses (and VAT) from another bank account, you cannot claim back anything." 

“When expanding internationally, CFOs and other key decision makers should consider the tax regime of the country of establishment. Specifically, what are the corporate tax implications and various exemptions provided to international companies doing business within this region?” advises John.  

Beyond VAT, associations must consider broader tax implications when establishing a presence in foreign markets: 

• Corporate tax and legal environment: Some countries, like Belgium, offer more favourable tax regimes for non-profit organisations than others, such as the Netherlands. Jeroen explains: “In the Netherlands, if you’re an association and you run your association business above a certain amount of net revenues, you start paying corporate tax. Belgium, where Brussels is the capital of the European Union, is typically a market that attracts, and wants to attract, many international organisations and associations. Belgium has therefore made sure that they have a very stable and good legislation for international associations.” 
   
• Double taxation avoidance: Treaties, like the agreement between the US and Spain, help prevent income from being taxed in both countries. These agreements provide benefits such as reduced withholding taxes, foreign tax credits, and clarified obligations.
   

The art and science of global pricing strategy is complicated when you build in other markets. The cultural impact, the concept of membership and joining something, is familiar to prospective members in Europe and in the US but may be less so in other countries. “It requires balancing local pricing strategies with overall corporate objectives to ensure profitability and market penetration,” says John. 

“Make sure that the invoices that you issue, respect the rules of the country where you operate. Otherwise, you cannot claim back and you cannot properly declare the VAT,” says Jeroen. Technology can simplify VAT reporting and tax allocation. Some financial management tools include modules for handling multi-country compliance. Additionally, leveraging resources such as World Bank economic reports and professional networks can help associations stay informed about global tax trends. 

To mitigate risks and ensure compliance across borders: 

1. Engage local experts: Regular consultations with VAT and tax specialists are crucial, especially during financial closures and audits.
    
2. Monitor exchange rates: Budget for currency fluctuations and consider invoicing in local currencies to reduce exchange risks. “It’s important to constantly monitor relative currency strength when issuing and receiving payments in any foreign currency. You can offset some of this risk by matching local event expenses to local revenues by using payment gateways with transparent daily exchange rates,” says John.
    
3. Streamline payments: Use payment gateways that support multi-currency transactions and comply with local security protocols. “In Europe, for example, banks require 3D secure authentication, which is an additional layer of security for online credit and debit card transactions. Many US banks and credit cards, such as American Express, do not always fulfil the 3D security check required in the EU so you need to check,” notes John. 

As associations expand internationally, proactive tax planning and compliance management will remain essential. By working with experts, leveraging technology and adopting best practices, associations can navigate the complexities of VAT and taxation, turning potential challenges into opportunities for growth and success.

This article was informed by our webinar: Financial Mastery for Global Growth: VAT, Tax and Currency, part of MCI’s Global Growth Series. Click here to watch the webinar. 

The nextwebinar, Expanding to Asia Pacific: Business and Operating Models for Global Growth​, will be broadcast on 27 February 2025. 

For advice from myself or any of the panellists quoted in this article, please find their details below: 

Jeroen van Liempd​
Director Engagement, Associations & Communities
MCI Brussels​ 
jeroen.vanliempd@wearemci.com ​ 

Laurent Gerard​
Chief Financial Officer​
MCI Benelux​ 
laurent.gerard@wearemci.com 

John Sekel, CPA​
Associate Vice President, Finance, Association Solutions
MCI USA​ 
john.sekel@wearemci.com ​