On April 28, 2016 the European Commission issued a press release announcing that it refers Germany to Court for failing to amend VAT rules for travel agents. According to the press release the reason herefor is Germany’s 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).
According to the press release the scheme aims to simplify and amend the VAT rules applicable to travel agencies selling travel packages within the EU. According to the European Commission 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 Commission adds that the aim of this rule is to create a level playing field for providers and to eliminate distortions of competition.
The press release continues by stating that 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. According to the European Commission, Germany currently applies the scheme only to travel services provided to private users.
The European Commission continues by stating that 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. According to the Commission, 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 September 24, 2015. As, according to the European Commission, 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.
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