WIREDGOV

The European Commission has decided to refer Germany to the Court of Justice of the European Union for its failure to properly apply the special value added tax (VAT) scheme for travel agents, as provided for in the VAT Directive (Council Directive 2006/112/EC).

The scheme aims to simplify and amend the VAT rules applicable to travel agencies selling travel packages within the EU. It is obligatory for all travel agents to apply the scheme, provided the conditions required in the Directive are met. This stipulates that travel agents must set their profit margin (the difference between the actual cost to the agent and the total amount to be paid by the traveller, exclusive of VAT) as the taxable amount of VAT. The aim of this rule is to create a level playing field for providers and to eliminate distortions of competition.

A number of judgments by the Court of Justice of the EU in September 2013 held that this special scheme is applicable not only travel agents dealing with private travellers, but to all customers, including businesses. Germany currently applies the scheme only to travel services provided to private users.

The German authorities also allow travel agents to set one single profit margin for all supplies of travel packages sold during a tax declaration period. Under EU rules, however, travel agents are required to calculate the net profit margin – a measure of profitability which is calculated by finding the net profit as a percentage of the revenue - per travel service and they are not allowed to make an overall calculation of the VAT margins per tax declaration period.

The European Commission sent a reasoned opinion to the German authorities on 24 September 2015. As Germany has failed to bring its legislation in line with EU law, the European Commission has decided to refer Germany to the Court of Justice of the EU.

More information:

• On the key decisions in the April 2016 infringements package, see MEMO/16/1452.
• Infringements' proceedings in the area of Taxation and Customs Union.
• On the general infringement procedure, see MEMO/12/12.
• On infringement procedures.