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EC Asks Germany To Amend VAT Legislation

by Ulrika Lomas, Tax-News.com, Brussels

25 September 2015


The European Commission has asked Germany to amend its value-added tax (VAT) legislation on the application of a special "price margin" scheme for travel agents.

Under the scheme, a travel agent can set a so-called "price margin" as the taxable amount for VAT. The price margin is the difference between the actual cost to the agent and the total amount, exclusive of VAT, to be paid by the traveller.

The European Court of Justice ruled against Spain's implementation of the same scheme in September 2013. It decided that the scheme is applicable not only to private travellers, but to all customers, including businesses. According to the Court, the travel agent should calculate the margin per travel service and not be permitted to make an overall calculation of the VAT margins per tax declaration period.

Currently, in German VAT law, the scheme only applies in Germany to travel services provided to private end users, contrary to the Court's ruling. It also allows travel agents to set one single profit margin for all supplies of travel packages sold during a tax period.

The Commission's request takes the form of a reasoned opinion. In the absence of a satisfactory response within two months, the Commission may refer Germany to the European Court of Justice.

TAGS: compliance | tax | business | European Commission | value added tax (VAT) | tax compliance | law | legislation | tax rates | Germany | Spain | tax breaks | tax reform | services | Europe

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