Germany referred to the European Court of Justice over the VAT treatment of travel agents

31 May 2016

Germany has been referred to the European Court of Justice (ECJ) by the European Commission (EC) for its continuing non-compliance with the EU VAT Directive on travel agents.

As per our previous article in 2015 the EC issued a reasoned opinion requesting that Germany amend their VAT legislation on the application of a special scheme for travel agents, referred to as the Tour Operators Margin Scheme (TOMS), in order to bring it in line with the EU VAT directive. The scheme allows travel agents to account for VAT only on the profit margin element of their trade regardless of whether the services are sold to businesses or consumers.

The current German VAT legislation states that this scheme can only be applied to services provided direct to consumers and also allows travel agents to set one single profit margin for all supplies sold during a VAT return period. However, based on previous court rulings, the European Court of Justice stated that this application is incorrect and that TOMS should apply to services provided to business customers as well. The Court also stated that a travel agent should be able to calculate the margin per single travel service provided and not just on the whole VAT period.


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