Draft of a circular on the VAT implications of distance learning

According to the current regulation, pre-produced content such as video courses, learning platforms, and recordings of live content are excluded from the VAT exemption. The draft of the BMF circular corroborates this legal stance. However, it adds that such offers, which are permitted under the Distance Learning Protection Act, should continue to be exempt from tax as educational services. The Distance Learning Protection Act is applicable to the provision of skills and knowledge instruction on a contractual basis, where the instructor and learner are physically separated at the time of instruction and the instructor provides monitoring and support for the learner's learning progress. However, the precise requirements, particularly those related to physical separation, are controversial.

While the approval under the Distance Learning Protection Act puts the provider of the service on the safe side in terms of VAT, it does, however, bring with it other problems. For instance, the approval could mean the invalidity of previous contracts. Newly concluded contracts must also meet the strict requirements of the Distance Learning Protection Act.

Key takeaway

The draft of the circular is currently with the tax adviser associations for consultation. They have the opportunity to provide recommendations. It is to be hoped that they will prevail with their current demands for more comprehensive regulation. Presently, only a very small number of education providers are licensed under the Distance Learning Protection Act. The mere reference to the Distance Learning Protection Act actually creates more legal uncertainty due to the aforementioned matters.