Germany to be referred to CJEU over VAT for travel agents

The EU VAT directive includes a special scheme for travel agents that aims to simplify the rules applicable to travel agents selling travel packages, in order to create a level playing field for providers and to eliminate distortions of competition, the Commission said.

It is obligatory for all travel agents to apply this scheme, under which travel agents must set their profit margin as the taxable amount of VAT, the Commission said. The profit margin is defined as the difference between the actual cost to the agent and the total amount to be paid by the traveller, exclusive of VAT.

Germany has been applying the directive only to travel services for private users, and not business customers.  In previous judgments the CJEU has held that the directive applies to both private and businesses users, the Commission said.

German authorities also allow travel agents to set one single profit margin for all supplies of travel packages sold during a tax declaration period, the Commission said.

"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," it said.

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," it said.