Switzerland Proposes Detailed VAT Rules for Esports Competitions

Summary

The Swiss Federal Tax Administration has published draft VAT practice under which esports competitions do not qualify as exempt sporting events because competition alone is insufficient and essential physical activity is absent. [rsm.global]
Tickets, entry fees and prize money paid to players are treated as consideration for taxable services where the relevant supply is located in Switzerland. [rsm.global]
The proposed place-of-supply treatment depends on whether an event is online, on-site or hybrid. Fully online participation generally follows the recipient-location rule, while on-site competitions are treated as entertainment services supplied where the activity occurs. [rsm.global]

Extended article

The Swiss Federal Tax Administration has proposed its first structured VAT practice specifically addressing esports competitions.

The draft would add a new esports section to Swiss VAT Info 24, “Sport.” It predates consultation with the authority’s advisory body and may therefore still change. [rsm.global]

Under the proposed interpretation, a sporting event must involve sustained physical effort produced by the human body and directed towards physical performance, health or well-being. The existence of a competition is not sufficient by itself.

Esports events are mainly based on intellectual effort, reaction and coordination within a virtual environment. They would therefore not qualify for the VAT exclusion applicable to sporting events, even where a tournament takes place before a live audience. [rsm.global], [en.taxlawblog.ch]

The draft distinguishes esports from activities in which an electronic device is used but physical activity remains central. An event involving a stationary bicycle connected to a screen, for instance, may still qualify as sport if the participant’s physical activity is the essential characteristic. [rsm.global]

Ticket sales and participation fees for esports competitions would constitute consideration for taxable services where the place of supply is Switzerland. Prize money received by players would also be treated as income from taxable services. Players may consequently need to consider Swiss VAT registration where the relevant statutory conditions are met. [rsm.global]

For fully online tournaments, the draft generally treats the supply as an IT-related service taxable at the recipient’s location. For competitions held entirely at a physical venue, the supply is treated as an entertainment service taxable where the activity takes place. [rsm.global]

For hybrid events, the treatment would follow the form of participation selected by the player or spectator. Where participation is not selected in advance, the online treatment would apply under the draft approach. [rsm.global]

The proposals are particularly relevant for tournament organisers, streaming platforms, esports teams, sponsors and professional players. Contracts and registration systems will need to distinguish between on-site access, remote access and hybrid participation if the draft is finalised in its current form.

External links