Classic: the Dudda judgment and the place of ancillary services

The place of supply rules determine which country has the right to tax. The classic 1996 Dudda judgment clarified the scope of services ancillary to cultural, artistic, sporting and entertainment activities.

The facts

Through his business established in Germany, Jürgen Dudda supplied sound engineering services, such as sound engineering for concerts and similar events. Those events took place abroad and he was engaged by the organisers.

Under the place of supply rules then in force, services were in principle taxable in the country where the supplier was established. An exception applied to services relating to cultural, artistic, sporting, scientific, educational and entertainment activities or similar activities, including those of the organisers of such activities and of ancillary services. Those were taxable in the country where they were performed.

The German tax authorities wanted to tax the fees, because Dudda was established in Germany. Dudda argued that under the exception his services were taxable in the country where the events took place. The German court referred the following question to the Court of Justice:

Does a business providing sound engineering for artistic or entertainment events supply a service of the kind described in that exception, where its task consists of matching the choice and operation of the equipment used to the given acoustic conditions and the sound effects sought, and of providing the necessary equipment and operating staff?

Because sound engineering for an artistic or entertainment event is a necessary precondition for that event taking place, the Court held that it must be regarded as an ancillary service. No particular artistic standard was required: without Dudda's services the event could not go ahead. His services were therefore taxable in the country where they were actually performed.

Why this matters in practice

The place of supply rules have changed over the years. B2B services are now in principle taxable in the customer's country and B2C services in the supplier's country.

An exception to the general B2B rule applies to admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events such as fairs and exhibitions, and to services ancillary to that admission. The place of supply is then where the event actually takes place. For B2B services of the kind Dudda supplied, the customer's country now has the right to tax.

The reasoning in Dudda remains relevant for B2C services. For those, services relating to cultural, artistic, sporting, scientific, educational and entertainment activities or similar activities, including those of the organisers and of ancillary services, are still taxed in the country where they are actually performed.

One important rule from the judgment applies to all the place of supply rules: first consider whether an exception applies, and only where it does not does the general rule take over.