ECJ judgement on the VAT treatment of travel agents supplies in Germany

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The European Court of Justice (ECJ) has made its judgement in the case C-380/16 relating to the application of the special scheme for travel agents, referred to as the Tour Operators Margin Scheme (TOMS), in Germany.

The court ruled that Germany failed to fulfil its obligations set under the EU VAT directive by:

• Only applying TOMS on services supplied directly to consumers.
• Allowing travel agents to only set one single profit margin for all supplies sold during a VAT return period.

As per the EU VAT directive, TOMS requires travel agents to account for VAT on the profit margin element of their trade regardless of whether the service is provided to a business traveller or to a consumer. They should also be able to calculate the margin for each transaction and not just over the whole VAT return period.

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