VAT - Special scheme for travel agents - Main contents

Document date	15-12-2009
Publication date	22-01-2013
Reference	17567/09
From	Incoming Spanish Presidency
To	Working Party on Tax Questions - Indirect Taxation (VAT)
External link	original PDF
Original document in PDF

COUNCIL OF PUBLIC Brussels, 15 December 2009 (04.01)

THE EUROPEAN UNION (OR. en,es)

17567/09

Interinstitutional File:

2002/0041 (CNS) LIMITE

FISC 188

NOTE from: Incoming Spanish Presidency to: Working Party on Tax Questions - Indirect Taxation (VAT) No. Cion prop.: 6251/02 FISC 49 - COM(2002) 64 final i Subject: VAT

• - 

  Special scheme for travel agents

Introduction: Objectives of the special scheme for travel agents

• 1. 

  The special Value Added Tax scheme for travel agents was created in 1977 with the adoption of

  Council Directive 77/388/EEC i of 17 May 1977.

• 2. 

  The first objective of the scheme was to simplify the application of the VAT rules to these

  transactions, saving the operators from having to register in the various Member States where the services were provided.

• 3. 

  A second objective was to ensure that VAT due on goods and services purchased by an agent is

  collected by the state in which those transactions are carried out, while the tax corresponding to the services supplied by the travel agent is collected in the state in which the agent is established.

17567/09 tim/SD/ck 1 4. Several additional aspects of VAT, which have given rise to significant problems and which we

address in this document, are particularly important for the workings of the special scheme:

• - 

  rules on the location of hotel-sector accommodation services; - the new procedure for refunding VAT charged to taxable persons established outside, as

  provided for in Directive 2008/9/EC i in relation to the option for applying the general scheme;

• - 

  not allowing business travellers to deduct VAT; - application of the special scheme in the sale of special "travel packages" between wholesale and

  retail travel agents;

• - 

  the rising sales of travel products on the internet.

Proposal for a Directive on travel agents

• 5. 

  With the above problems in mind, the Commission presented a proposal to amend the special scheme.

  The proposal was discussed during the Spanish and Italian Presidencies in 2002 and 2003.

• 6. 

  The proposal envisaged the following changes to the existing scheme:

  • - 

    clarification of the scope of the special scheme: it is applicable to the sale of "travel packages"

    between travel agents;

• - 

  taxation in the Community of services provided by non-Community agents to customers resident

  in the European Union;

  • - 

    giving agents the opportunity not to apply the special scheme (opt-out clause); - allowing travel agents to calculate a single margin for all deliveries of goods during a given

    period.

• 7. 

  In the discussions a proposal was also made for a "one-stop-shop" system for operators resident in

  third countries, so that they would be required to register in a Member State in order to provide such services in the European Union. The system would operate in a way similar to the current system for electronically supplied services.

• 8. 

  Nevertheless, no agreement was reached between the various Member States and the dossier has not

  been discussed in Council again since.

• 9. 

  The Spanish Presidency considers it necessary to resume discussions in Council on the reform of the

  travel agents scheme. To that end, it would like to put the following questions to delegations in order to reflect on the various problems that the special scheme is causing at present, and possible solutions to them, on the basis of the 2002 Commission proposal.

• 1. 

  CLARIFICATION OF THE SCOPE OF THE SPECIAL SCHEME

• 10. 

  The Commission is aware that Member States have different interpretations of the current legislation

  as regards the scope of the scheme. Thus, while some Member States consider that the special scheme should also be applied to travel agents that purchase goods and services from third parties and resell them in the form of "travel packages" to other agents, other Member States take the view that the special scheme should apply only to agents that deal directly with travellers.

• 11. 

  The Commission, taking the view that the first solution was the one that would best allow it to ensure

  that transactions are taxed in the Member State of consumption, proposed applying the special scheme

  to transactions carried out by entrepreneurs or professionals who purchase goods or services with the

  aim of reselling them in the form of "travel packages".

• 12. 

  Do the Member States consider it desirable for the special scheme to be applied to businesses that

  purchase goods or services from third parties with the aim of reselling them as "travel packages" or should application of the scheme be restricted to travel products sold directly to travellers?

• 2. 

  TAXATION IN THE COMMUNITY OF SERVICES PROVIDED BY NON-COMMUNITY

  AGENTS TO CUSTOMERS RESIDENT IN THE EUROPEAN UNION

• 13. 

  Article 307 of Directive 2006/112/EC i lays down that the provision of services by the travel agent is

  taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services.

• 14. 

  To prevent this location rule from continuing to distort competition between agents established in the

  Community and those which are not, the Commission proposed that the services provided by non-Community travel agents to customers established in the Community should be subject to tax in the Community insofar as they are consumed there. This rule is becoming extremely important, since travel products are beginning to be marketed on a very large scale via the internet.

• 15. 

  To that end, the simplified scheme established by Council Directive 2002/38/EC i for taxation of

  electronically supplied services could be extended to the provision of travel services by travel agents not established in the Community to customers established there.

• 16. 

  Should services provided by non-Community travel agents to customers established in the Community

  and relating to trips within the Community be subject to VAT in the Community?

• 17. 

  Should a simplified scheme be applied to those services, based on a one-stop shop like that which

  exists for electronically supplied services?

• 3. 

  GIVING AGENTS THE OPPORTUNITY TO WAIVE APPLICATION OF THE SPECIAL

  SCHEME (OPT-OUT CLAUSE)

• 18. 

  The main aim of the special scheme is to simplify the application of the tax. However, at times its

  application leads to distortions and problems that could make application of the general VAT scheme more sensible for some travel agents. These problems arise when the recipient of such services is an entrepreneur or professional entitled to deduction of VAT who purchases travel services for the purposes of his/her business activity. The application of the special scheme, and specifically of Article 310 of the Directive, prevents the deduction or refunding of amounts due from such transactions, which generates a clear distortion in the VAT application mechanism.

• 19. 

  In that context it seems appropriate to consider the possibility of introducing an option that would

  allow travel agents to opt for application of the general scheme. This should all be implemented without losing sight of the need for monitoring, as the extensive use of an option scheme could give rise to problems, mainly when a single operator applies both the general scheme and the special scheme, depending on for whom the work in question is carried out.

• 20. 

  During the discussions in 2002 and 2003 two disagreements regarding the exercising of the option

  prevented its being developed. The Presidency believes that a new approach to them may be possible now:

• - 

  Location of hotel-sector accommodation services

Prior to the adoption of Directive 2008/8/EC i, there was debate as to whether such services should be taxed at the place of origin, i.e. at the registered office or establishment of the provider, or at the destination, i.e. the place where the building providing accommodation services is situated.

The new rules embodied in Directive 2008/8/EC i clarify the debate: under the new Article 47 of Directive

2006/112/EC, the accommodation services are taxed at the place where the building is located.

• - 

  Refund of VAT amounts charged to taxable persons established outside

Prior to the adoption of Directive 2008/9/EC i of 12 February 2008 laying down detailed rules for the refund of value added tax, the development of an option scheme and the resulting possibility of taxation under the general VAT scheme faced the obstacle of the long and difficult procedure for refunds to taxable persons not established in the Community governed by Council Directive 79/1072/EEC.

Now, Directive 2008/9/EC i establishes a flexible and simplified procedure that makes it possible to overcome the earlier obstacles.

• 21. 

  This progress in Community harmonisation may facilitate investigation into the setting up of an option

  scheme.

• 22. 

  In that context, the Presidency takes a positive view of the possibility of limiting the option to

  transactions in which the entrepreneur purchasing the travel product will be its final consumer, i.e. it is a business trip and not a travel product to be resold.

• 23. 

  The Presidency urges Member States to express their views on whether an option scheme is needed

  and, if so, on its scope.

• 4. 

  CALCULATION OF PROFIT MARGIN

• 24. 

  Determining the profit margin of a travel agent transaction by transaction entails a degree of

  complexity and in most cases an administrative workload that is hard to justify. To reduce the agents' workload, the Commission proposed an optional scheme for Member States that would allow agents to calculate an overall profit margin over a given period. The rules applicable for this calculation would be similar to those envisaged for the special scheme applicable to second-hand goods, works of art, antiques and collectors' items.

• 25. 

  The overall margin would be equal to the difference between the following two amounts:

  (a) the total amount for business travel products delivered subject to the special scheme and

  supplied by the business travel provider during the tax period for which a declaration is being

  made, i.e. the sum total of the sale prices;

  (b) the total amount of purchases of goods and services made during the tax period for which a

  declaration is being made by the travel agent and which benefit the traveller.

• 26. 

  The Presidency asks Member States to express their views on whether travel agents subject to the

  special scheme should be offered the option of the calculation of their taxable base being fixed, on the basis of the profit margin, for each tax period taken as a whole.

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