COMMUNICATION FROM THE COMMISSION TO THE COUNCIL in accordance with Article 395 of Council Directive 2006/112/EC
Date: 2016-06-01
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Austria, VAT, derogation from EU law, taxable income, travel agency

EUROPEAN 
COMMISSION 

Brussels, 1.6.2016  
COM(2016) 355 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

in accordance with Article 395 of Council Directive 2006/112/EC 

EN 

   EN 

 
 
 
 
  
 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

in accordance with Article 395 of Council Directive 2006/112/EC 

1. 

BACKGROUND 

Pursuant to Article 395 of Council Directive 2006/112/EC of 28 November 2006 on 
the  common  system  of  value  added  tax  (the  'VAT  Directive'),  the  Council,  acting 
unanimously on a proposal from the Commission, may authorise any Member State 
to introduce special measures for derogation from the provisions of this Directive, in 
order to simplify the procedure for collecting VAT or to prevent certain forms of tax 
evasion  or  avoidance.  As  this  procedure  provides  for  derogations  from  the  general 
principles of VAT, such derogations should be proportionate and limited in scope. 

By  letter,  registered  at  the  Commission  on  23  December  2015,  the  Republic  of 
Austria  has  requested  to  be  authorised  to  introduce  a  measure  derogating  from  the 
special  margin  scheme  for  travel  agents.  In  accordance  with  Article  395(2)  of  the 
VAT Directive, the Commission informed the other Member States by letter dated 20 
April 2016 of the request made by the Republic of Austria. By letter dated 21 April 
2016, the Commission notified the Republic of Austria that it had all the information 
it considered necessary for appraisal of the request. 

2. 

THE REQUEST 

Articles 306 to 310 of the VAT Directive provide for a special 'margin' scheme for 
travel  agents  whereby  only  the  difference  (or  margin),  between  the  price  (without 
VAT)  paid  by  the  customer  and  the  actual  costs  of  the  travel  agent,  is  taxed.  This 
scheme is applicable insofar the travel agent acts in his own name and not solely as 
intermediary. 

Regarding this margin, Article 308 stipulates that "The taxable amount and the price 
exclusive  of  VAT,  within  the  meaning  of  point  (8)  of  Article  226,  in  respect  of  the 
single service provided by the travel agent shall be the travel agent's margin, that is 
to say, the difference between the total amount, exclusive of VAT, to be paid by the 
traveller  and  the  actual  cost  to  the  travel  agent  of  supplies  of  goods  or  services 
provided by other taxable persons, where those transactions are for the direct benefit 
of the traveller." 

In this context, the Court of Justice of the European Union (CJEU) has ruled that this 
article does not provide for any possibility of making an overall determination of the 
taxable amount of the travel agent's profit margins and that, consequently, the taxable 
amount must be calculated by referring to each single service provided by the travel 
agent1. 

With its request, Austria wants to derogate from Article 308 of the VAT Directive, as 
interpreted by the CJEU, by allowing travel agents to calculate a single profit margin 
during  a  year  for  all  the  supplies  of  travel  services  covered  by  the  special  VAT 
scheme (i.e. when the travel agent is not acting as intermediary). 

1 

Case C-189/11, European Commission v Kingdom of Spain, par. 101 -103 

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3. 

THE COMMISSION'S VIEW 

When the Commission receives requests in accordance with Article 395 of the VAT 
Directive,  these  are  examined  to  ensure  that  the  basic  conditions  for  their  granting 
are  fulfilled  i.e.  whether  the  proposed  specific  measure  simplifies  procedures  for 
taxable  persons  and/or  the  tax  administration  or  whether  the  proposal  prevents 
certain types of tax evasion or avoidance. In this context, the Commission has always 
taken  a  limited,  cautious  approach  to  ensure  that  derogations  do  not  undermine  the 
operation  of  the  general  VAT  system,  are  limited  in  scope,  necessary  and 
proportionate. 

Furthermore, the CJEU has ruled that measures, taken in application of Article 395 
of  the  VAT  Directive  in  order  to  simplify  the  procedure  for  collecting  VAT  or  to 
prevent  certain  forms  of  tax  evasion  or  avoidance,  have  to  be  necessary  and 
appropriate  for  realising  the  specific  objective  which  they  pursue  and  have  as  little 
effect as possible on the objectives and principles of the VAT Directive2. 

It therefore follows from this CJEU ruling that derogations under Article 395 of the 
VAT Directive should only be granted when a particular situation in a Member State 
requires a specific measure. In the present case, however, it is not justified why such 
a derogation, requested as a simplification measure, would specifically be needed in 
Austria.  On  the  contrary,  the  special  scheme  for  travel  agents  is  implemented 
everywhere in the EU and the margin is to be calculated in all Member States in the 
same  way;  i.e.  on  each  single  supply.  Considering  a  specific  derogation  to  alter  a 
situation  which  is  equally  applicable  in  all  Member  States  would  therefore 
circumvent  the  normal  procedure,  which  is  the  unanimous  adoption  by  the  Council 
after consultation of the European Parliament of an amendment to the VAT Directive 
upon proposal of the Commission. 

In addition, the Commission considers that such a derogating measure would give a 
specific  advantage  to  travel  agents  established  in  Austria  in  comparison  to  travel 
agents  established  in  other  Member  States.  Because  the  place  of  taxation  being  the 
place  of  establishment,  such  an  advantage  could  create  issues  from  a  competition 
point of view in the internal market, especially at a time when customers buy more 
and  more  of  these  services  on-line.  Travel  agents  established  in  (or  relocating  to) 
Austria  would  have,  as  put  forward  in  the  derogation  request,  the  possibility  to 
calculate an overall profit margin for a calendar year. Therefore, they would have the 
possibility, contrary to travel agents in other Member States, to consolidate negative 
margins  resulting  from  certain  specific  supplies  with  positive  margins  of  other 
supplies;  resulting  in  a  lower  VAT  liability  and  subsequent  payment  of  tax  to  the 
administration. 

The Commission had already proposed a new travel agent scheme for VAT purposes 
in  2002.  However,  the  Council  could  not  agree  on  the  (amended)  proposal3  which 
was  finally  withdrawn  by  the  Commission  in  20144.  Notwithstanding  this,  the 
Commission  continues  exploring  the  possibilities  for,  where  necessary,  improving 

2  
3  

4  

See for example case C-489/09, Vandoorne NV, par. 27 
Proposal for a Council Directive amending Directive 77/388/EEC as regards the special scheme for 
travel agents (COM(2002)64final) and Amended proposal for a Council Directive amending Directive 
77/388/EEC as regards the special scheme for travel agents (presented by the Commission pursuant to 
Article 250(2) of the EC Treaty) (COM2003(78)final) 
Withdrawal of obsolete Commission proposals -list of proposals withdrawn (OJ C 153 of 21.5.2014, p. 
3) 

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this scheme taking into account the effects of the above-mentioned CJEU ruling on 
travel  agents  and  in  the  light  of  the  principle  of  taxation  in  the  Member  State  of 
destination that the European Union has agreed upon as the main principle for future 
VAT  legislation5  and  later  on  developed  by  the  Commission  in  the  VAT  Action 
Plan6. To this end, the Commission will shortly launch a study to evaluate the whole, 
currently origin-based, travel scheme (including the method for the calculation of the 
margin) with the aim, among others, to minimise administrative burdens. 

4. 

CONCLUSION 

On the basis of the above-mentioned elements, the Commission objects to the request 
made by the Republic of Austria. 

5  

6 

See Communication on the future of VAT (COM(2011)851, 6.12.2011). This was welcomed by the 
Council in its ECOFIN conclusions of May 2012 
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/130257.pdf.  
and by the European Parliament in its resolution of 13 October 2011 on the future of VAT 
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2011-
0436 
COM(2016)148 final  
http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1461242313847&uri=CELEX:52016DC0148  
4