COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE EVALUATION Special Scheme for travel agents of the Council Directive 2006/112/EC on the common system of value added tax
Date: 2021-02-17
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: EU Member State, VAT, provision of services, tax collection, tax harmonisation, tax law, travel agency

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  EN 

   EUROPEAN COMMISSION  Brussels, 17.2.2021  SWD(2021) 33 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE EVALUATION  Special Scheme for travel agents of the Council Directive 2006/112/EC on the common system of value added tax {SWD(2021) 32 final}  
 
 
EXECUTIVE SUMMARY 

The special VAT scheme for travel agents (the “special scheme”), set out in Articles 306 to 
310 of the VAT Directive1, is a simplification measure derogating from the normal VAT rules 
that is in place since the adoption of the common VAT system in 1977. 

Under the special scheme, all transactions performed by a travel agent acting in his own name 
in  respect  of  a  journey  are  regarded  as  a  single  supply.  The  taxable  amount  is  the  profit 
margin  realised by the travel  agent  on the supply of this single service and hence the travel 
agent is not entitled to deduct input VAT. The place of taxation for the travel agent's supply is 
where he has established his business. 

This  scheme  has  never  been  updated  nor  applied  uniformly  by  Member  States,  leading  to 
numerous  cases  brought  to  the  Court  of Justice  of  the  European  Union.  Over  the  years,  the 
travel industry has undergone profound changes that are not reflected in the current rules.  

The performance of special scheme is assessed against the five evaluation criteria set out by 
the  Better  Regulation  Guidelines2.  The  key  findings  of  the  evaluation  are  summarised  as  it 
follows: 

1.  The special scheme has been widely effective in achieving its two main objectives of 
simplifying  the  application  of  VAT  rules  for  travel  agents  and  ensuring  a  fair 
allocation of VAT revenue.  

The  scheme  permits  travel  agents  to  operate  within  the  EU  without  having  to  register  and 
apply VAT in each of the other Member States where travel services take place. The place-of-
supply rule and the concept of single service are key elements that bring simplicity and make 
the scheme much more straigthforward to apply than the normal VAT rules.  

The fact that the special scheme prevents the travel agent from either deducting or obtaining 
refund  of  input  VAT  also  ensures  an  equal  distribution  of  revenues  among  Member  States. 
The  majority  of  VAT  collected  via  the  special  scheme  goes  to  the  Member  States  of 
consumption of the travel services. 

2.  The special scheme presents a number of shortcomings. 

Taxation of business to business supplies at the margin comes at a cost for businesses: non-
deductibility of input VAT. However costs and benefits deriving from the application of the 
special rules differ according to the business model in use.  

The  blocked  input  VAT  has  also  placed  travel  sectors  mainly  targeting  businesses,  namely 
Travel Management Companies and Meeting, Incentives, Conference and Events organisers, 
at a competitive disadvantage when compared to suppliers not subject to the special scheme 
(e.g. principal suppliers, suppliers of in-house services and intermediaries).  

1   Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 

11.12.2006, p. 1), http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al31057  

2   https://ec.europa.eu/info/sites/info/files/better-regulation-guidelines.pdf  

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However,  the  rule  of  taxation  at  origin  leads  to  non-taxation  of  the  margin  made  by  third 
country operators on the sale of EU travel services. The inequality of treatment becomes more 
acute with the increased competition at the global level and the fact that no physical presence 
is required to sell travel services into the EU market.  

The scheme lacks in clarity and harmonisation. Despite or even because of the extensive case-
law, its rules remain unclear and not uniformly applied by Member States. This is not only a 
source of complexity in the application of the scheme but also leaves scope for distortions of 
competition detrimental to the proper functioning of the internal market.  

The scheme is outdated. It  was designed for "brick and mortar" travel agencies with a local 
office that hardly exist any longer.  It does therefore not capture the new economic reality in 
which travel agents operate and certainly is not fit for the digital age. 

3.  The special scheme continues to be relevant for the travel operators. 

The scheme has, in many respects, been successful and there is little desire within the industry 
to  see  the  scheme  as  such  brought  to  an  end,  as  confirmed  by  the  public  consultation.  The 
scheme  in  its  present  form  is  however  inadequate  to  meet  diverse  and  new  needs  of  travel 
operators and to support them in the Covid-19 crisis.  

4.  The  special  scheme  is  only  partially  consistent  with  the  developments  in  the  VAT 

system and in sector-specific regulations. 

The VAT system has gradually evolved towards taxation at destination to which the scheme 
has kept adequate consistency. Most of the services purchased by the travel agent are in fact 
taxed in accordance with the normal place-of-supply rules where the services take place. 

For  reason  of  consistency,  the  special  rules  and  their  interpretation  however  need  to  take 
better  account  of  essential  developments  in  the  regulatory  framework  aimed  at  improving 
legal certainty and uniformity of treatment in particular with the regard to the functioning of 
the travel package market3 and platform-to-business relations4.  

5.  The EU added value of the special scheme for the functioning of the single market is 

hampered by divergent application of its rules.  

As  integral  part  of  the  common  VAT  system,  the  special  scheme  must  be  applied  in  a 
consistent manner. The evaluation found that on a number of aspects, the majority of Member 
States  continues  to  apply  or  intepret  in  different  ways  the  common  rules.  This  hampers  the 
correct  functioning  of  the  internal  market  by  causing  distortions  of  competion  whether  at 
national or Union level and leads to episodes of non-taxation or double taxation.  

The  public  consultation  shows  a  strong  demand  from  stakeholdersfor  clearer,  simpler  and 
more harmonised rules for travel agents. According to them the rules as they are applied today 
result  in  market  distortions  and  do  not  ensure  a  level  playing  field  for  all  travel  agents 
operating in the EU market, including those not established within the EU.  

3   Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package 

travel and linked travel arrangements (OJ L 326, 11.12.2015, p. 1). 

4   Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting 
fairness and transparency for business users of online intermediation services (OJ L 186, 11.7.2019, p. 57). 

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