Opinion of the Advocate General — ECLI:EU:C:2025:929
Date: 2025-11-27
Language of the case: German

summary, the special tax scheme for travel agents serves the formal purpose of facilitating the calculation and payment of tax and balancing the distribution of tax revenues among Member States. However, the application of that special scheme in a situation such as that in the main proceedings infringes the fundamental and substantive principles of the common system of VAT, such as the right of deduction and tax neutrality, and that infringement concerns activities that do not fall within the scope of the special scheme. In such a case, formal considerations should not take precedence. 58. Of course, the common system of VAT is designed in such a way that it functions optimally only when uniformly applied to every economic activity. Any derogations, such as exemptions, margin taxation, the application of reduced rates, or even the lack of full harmonisation of those rates across Member States, distort, or have the potential to distort, the functioning of that system and potentially competition as well. Such distortions are acceptable if the positive effects of the derogations outweigh the negative ones. The opposite is true, however, in a situation such as in the present case, where the negative effects in the form of unfavourable tax treatment of the supply of goods are not offset by any benefits resulting from the application of the special tax scheme for travel agents to tourist services. 59. Therefore, Article 26 of Directive 77/388 should, in my view, be interpreted in such a way as to avoid that unfavourable treatment of the supply of goods made in the context of tourist excursions. 60. The simplest solution would be to grant a taxable person engaged in an activity such as the one at issue in the main proceedings the right to deduct from the tax due on the supply of goods the tax paid on the purchase of transportation services (and possibly other tourist services) in so far as the cost of purchasing those services is not covered by the fees from excursion participants. 61. Such an interpretation would make it possible to combine the application of the special tax scheme for travel agents with the correct application of the general principles of taxation to the supply of goods, together with the right – which is inseparable from those principles – to deduct the tax paid on the purchase of goods and services used for the purposes of the taxable activities. Indeed, while the costs of purchasing transportation services for excursion participants cannot be attributed to specific transactions involving the supply of goods conducted as part of that excursion, as not every participant is required to purchase goods, those costs – in so far as they are not covered by the fees charged to participants – undoubtedly constitute general costs of the activity consisting in the supply of goods and, as such, give rise to the right to deduct.(33) 62. However, Article 26(4) of Directive 77/388 expressly excludes the right to deduct VAT paid on the purchase of services for the direct benefit of travellers if the special tax scheme for travel agents applies. Therefore, an interpretation allowing the deduction of that tax in so far as the fees charged to excursion participants do not cover the cost of transportation services would be an interpretation contra legem – contrary to the express wording of that provision. 63. In contrast, the phrase ‘operations of travel agents’ in Article 26(1) of that directive, which defines the scope of application of the special tax scheme for travel agents, is not as unequivocal.(34) Moreover, a situation such as that in the present case has not yet been considered by the Court, as the case-law to date has dealt with situations in which the taxable person charged a flat fee for all services provided, and that fee covered all the costs of those services. The only problem, if any, was the calculation of the proportion in which that fee constituted payment for the services covered by the scheme. (35) 64. In my view, therefore, an interpretation is possible according to which the operations of travel agents within the meaning of that provision do not include operations which consist in organising excursions combined with the supply of goods in a situation where the fees charged to excursion participants do not cover the entire cost of purchasing transportation services from other taxable persons, and those costs constitute, in the remaining part, a component of the price of those goods. 65. Such an interpretation entails taxing all of the taxable person’s activities under the general rules. This will not actually change the tax burden on tourist services, which will be taxed,(36) but the taxable person will have the right to deduct the input tax paid, that is to say, the tax paid when purchasing those services from subcontractors. The result will be similar to the application of the special tax scheme for travel agents, assuming a negative margin. On the other hand, the taxable person will regain the right to deduct the remaining part of that tax from the tax due on the supply of goods, thus restoring the tax neutrality of that element of its business and preventing the distortions discussed in points 35 to 47 of this Opinion. 66. In view of the above, I propose that the answers to the first and second questions should be that Article 26 of Directive 77/388 must be interpreted as not applying to a situation in which a taxable person purchases tourist services, in particular transportation services, from other taxable persons and subsequently provides them in its own name within the framework of excursions combined with the supply of goods, the purchase of which is not a condition for participation in the excursion, with the taxable person charging participants a fee that does not cover the entire cost of the services purchased from other taxable persons, and the remainder of that cost being covered by revenue from the supply of goods, thus becoming a component of the price of those goods. Third question referred 67. By its third question, the referring court essentially seeks to determine, in the event that the first two questions are answered in the affirmative, whether Article 12(1) of Directive 77/388 concerning the rate of VAT applies to a travel agent’s negative margin, with the result that the amount of tax is negative and the taxable person obtains the right to a refund. 68. If the Court agrees with my proposed answer to the first two questions referred, the third question will become irrelevant. However, I will address it briefly below for the sake of completeness in the analysis of this case. 69. The question is based on the assumption that the application of the tax rate to a travel agent’s negative margin should result in negative taxation. Arithmetically, that assumption is correct: the product of a negative taxable amount and a positive tax rate is a negative number. 70. However, the common system of VAT does not recognise the concept of ‘negative taxation’. The system is based on the assumption that the taxable amount is, in principle, always positive, as only transactions made for consideration, that is to say, for remuneration defined as a positive amount of money, are subject to taxation. In the absence of such remuneration, the transaction is not made for consideration and is not taxable. It is irrelevant, however, whether that remuneration is higher or lower than the costs incurred by the taxable person for the purposes of the transaction in question.(37) 71. A margin taxation scheme, such as the special scheme for travel agents, disrupts that principle, because the taxable amount is not the entire price of the service, but only the margin understood as the difference between that price and the costs incurred, and the difference may be negative if the cost of purchasing tourist services from other taxable persons exceeds the price the taxable person charges to its customers. 72. Directive 77/388 does not provide for any mechanism for refunding tax to the taxable person in such a situation, however. If the margin is negative, the taxable amount should be considered to be zero, and therefore the VAT due is also zero. 73. The only possibility of refunding VAT to the taxable person is provided for in Article 18(4) of Directive 77/388, but that applies to the refund of input tax paid where the amount of authorised deductions exceeds the amount of tax due on the taxable person’s taxable transactions during the tax period. As I understand it, the third question referred seeks to achieve a similar effect within the framework of the special tax scheme for travel agents. However, under that scheme, the right to deduct the input tax paid is expressly excluded pursuant to Article 26(4) of the Directive. 74. In view of the above, the answer to the third question should be that Article 12(1) of Directive 77/388, read in conjunction with Article 26 of that directive, must be interpreted as meaning that the application of the tax rate to a travel agent’s negative margin does not give rise to a taxable person’s right to a VAT refund. Conclusions 75. In the light of all of the foregoing, I propose that the Court’s answer to the questions referred for a preliminary ruling by the Bundesfinanzhof (Federal Fiscal Court, Germany) should be as follows: Article 26 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment must be interpreted as not applying to a situation in which a taxable person purchases tourist services, in particular transportation services, from other taxable persons and subsequently provides them in its own name within the framework of excursions combined with the supply of goods, the purchase of which is not a condition for participation in the excursion, with the taxable person charging participants a fee that does not cover the entire cost of the services purchased from other taxable persons, and the remainder of that cost being covered by revenue from the supply of goods, thus becoming a component of the price of those goods. 1 Original language: Polish. 2 OJ, English Special Edition: Series I Volume1967, pp. 14-15. 3 OJ 1977 L 145, p. 1. 4 Those directives, in effect at the time of the facts in the main proceedings, were repealed and replaced by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1). 5 By way of example, the referring court states that in 1999, the fees charged to participants covered 60% of the transportation costs on average. 6 Company P maintains that that is confirmed by the judgment of 13 December 2018 (V R 52/17, BStBl II 2019, 345, ECLI:DE:BFH:2018:U.131218.VR52.17.0) of the Bundesfinanzhof (Federal Fiscal Court, Germany), which is the referring court in the present case. 7 Council Directive of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31). 8 Council Directive of 13 June 1990 on package travel, package holidays and package tours (OJ 1990 L 158, p. 59). 9 Judgment of 13 October 2005, ISt (C‑200/04, ‘the judgment in ISt’, EU:C:2005:608, paragraphs 31 to 33). 10 See, in particular, with regard to the provisions of Directive 2006/112, which are identical in substance to those of Directive 77/388, judgment of 22 June 2016, Gemeente Woerden (C‑267/15, EU:C:2016:466, paragraphs 40 and 41 and the case-law cited). 11 See, in particular, judgment of 22 October 1998, Madgett and Baldwin (C‑308/96 and C‑94/97, ‘the judgment in Madgett and Baldwin’, EU:C:1998:496, paragraph 23). 12 The judgment in ISt (paragraph 36). 13 The judgment in ISt (operative part). 14 See, in particular, the judgment in ISt (paragraphs 26 to 28 and the case-law cited). 15 See, in particular, the judgment in Madgett and Baldwin (paragraphs 21 and 22). 16 The judgment in Madgett and Baldwin (paragraph 35). 17 The case that gave rise to the judgment in Madgett and Baldwin involved a hotel operator that provided to its customers, in addition to accommodation, an additional service of transportation to and from the hotel, which it purchased from another taxable person. Similarly, in its judgment of 25 October 2012, Kozak (C‑557/11, EU:C:2012:672, operative part), the Court held, on the basis of provisions of Directive 2006/112 which are identical in substance to Article 26 of Directive 77/388, that an in-house transportation service provided as part of a broader tourist service is not subject to the special tax scheme for travel agents. 18 The judgment in Madgett and Baldwin (paragraphs 32 and 33). See also Opinion of Advocate General Léger in Joined Cases Madgett and Baldwin (C‑308/96 and C‑94/97, EU:C:1998:182, points 46 to 53). 19 Which corresponds to Article 11(A)(1)(a) of Directive 77/388. 20 Which corresponds to Article 26(2) of Directive 77/388. 21 Judgments of 26 September 2013, Commission v Spain (C‑189/11, EU:C:2013:587, paragraphs 101 to 103), and of 8 February 2018, Commission v Germany (C‑380/16, not published, ‘the judgment in Commission v Germany’, EU:C:2018:76, paragraphs 88 to 92). 22 As regards the effect of a negative margin on the amount of VAT due, see below the analysis of the third question referred (points 69 to 73 of this Opinion). 23 Currently in Article 1(2) of Directive 2006/112. 24 See, most recently, judgment of 1 August 2025, Galerie Karsten Greve (C‑433/24, EU:C:2025:600, paragraph 35). 25 The judgment in Madgett and Baldwin (paragraphs 21 to 23). 26 See, most recently, judgment of 13 March 2025, Greentech (C‑640/23, EU:C:2025:175, paragraph 33). 27 The judgment in Commission v Germany (paragraph 55). 28 The judgment in Commission v Germany (paragraph 58). 29 See, to that effect, judgment in Madgett and Baldwin (paragraphs 18 and 33); judgment of 25 October 2012, Kozak (C‑557/11, EU:C:2012:672, paragraph 19). 30 See Article 9(2)(b) of Directive 77/388, now Article 48 of Directive 2006/112. The same holds true for accommodation and restaurant services (see Articles 47 and 55 of Directive 2006/112). 31 The judgment in Madgett and Baldwin (paragraphs 21 to 23). 32 See points 46 and 47 of this Opinion. 33 See, to that effect, judgment of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments (C‑132/16, EU:C:2017:683, paragraph 29). 34 It should be remembered that it is only as a result of the Court’s case-law that the provision applies to all taxable persons providing tourist services that they purchase from other taxable persons. 35 See the judgment in Madgett and Baldwin (paragraphs 36 to 46). 36 VAT will be charged on the entire fee charged to excursion participants. 37 That is because VAT is not an income tax, but a turnover tax – what is taxed is turnover, that is to say, total revenue from taxable activities, and not the profit from those activities.