3.

The special system for travel agents applies, in accordance with Article 26 of the directive, when certain conditions are met and involves on a number of points exceptions to the general rules of the directive on the calculation and levying of the VAT. According to Article 26(1), the Member States are to apply the special system to transactions effected by travel agents and tour operators — hereinafter referred to for the sake of convenience, simply as ‘travel agents’. Article 26 applies only where ‘the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities’. Article 26(2) provides that: — transactions peformed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller; — that service shall be taxable in the Member State in which the travel agent has established his business; and — the taxable amount shall be the travel agent's margin of profit, that is, the difference between the amount to be paid by the traveller and the cost to the travel agent of services provided by other taxable persons for the direct benefit of the traveller. Article 26(3), which is not directly relevant in this case, provides that the taxable amount, that is, the margin of profit, is reduced if the services to the traveller are performed outside the Community. Article 26(4) provides that travel agents cannot deduct VAT paid by the taxable persons from whom the agent has purchased the services provided. Article 26 thus contains, for the travel agents concerned, a practical system for the calculation of VAT having its background partly in the problems arising from these undertakings' special position as providers of typically complex services and partly, and in particular, from the fact that it frequently involves services performed in countries other than the one in which the travel agents are established. An essential aim of the system is to avoid the problems which travel agents would have with the tax authorities in other Member States if the general rules with regard to the calculation, payment and allowance for deduction of VAT were applied. The services included in the travel agent's sale of a journey to a customer, consisting for example in accommodation, board and transport in other Member States are dealt with for tax purposes according to those countries' rules, whereas, for the travel agent's ‘independent service’ tax is paid on the agent's margin of profit in the agent's own Member State. Even though the typically cross-frontier features of a travel agent's operations therefore constitute an essential part of the reason for Article 26, that article nevertheless undoubtedly applies also to the operations of a travel agent performed exclusively in one and the same Member State. It should also be stressed — as is done particularly by the Commission — that the application of Article 26 pre-supposes that in providing travel facilities the travel agent uses services performed by other taxable persons and that the travel agent's margin of profit represents the difference between the price the traveller is to pay the travel agent and the agent's costs in purchasing from other taxable persons services for the direct benefit of the traveller. That has two consequences. The first is that Article 26 does not apply if the travel agent uses exclusively his own services or services provided by nontaxable persons, and secondly that the margin of profit on which the agent is to pay VAT under paragraph (2) includes both his own services and services performed by nontaxable persons. Those conditions mean also that in any event it is irrelevant in a case such as this, as regards the amount of the VAT the traveller has to pay, whether or not the so-called ‘motoring holidays’ are covered by Article 26.