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ECJ case C-787/19 (European Commission v Republic of Austria) – Questions – Failure to align with VAT rules for travel agents

The European Commission claims that the Court should:

1.    declare that, by excluding from the special value-added-tax scheme applicable to travel agents travel services that are provided to taxable persons who use those services for their business, and by allowing travel agents, in so far as they are subject to that scheme, to determine the taxable amount for value added tax on a flat-rate basis for groups of services or for all services provided during a taxable period, the Republic of Austria has failed to fulfil its obligations under Article 73 and Articles 306 to 310 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax; 1

2.    order the Republic of Austria to pay the costs of the proceedings.

Pleas in law and main arguments

The applicant submits that the scheme laid down in Austria for calculating the value added tax on travel services does not comply with Directive 2006/112. That directive lays down, in Articles 306 to 310, a special scheme pursuant to which travel services provided by a travel agent to a customer are to be regarded as a single service. Austrian law impermissibly departs from that scheme.

First, it is not permissible to exclude from the application of that special scheme taxable persons who use travel services for their business. In its judgment of 26 September 2013, Commission v Spain (C-189/11, EU:C:2013:587), the Court of Justice already held that the special scheme in question is applicable not only to services provided to private end consumers, but also to services provided to taxable undertakings. It is not open to Member States to restrict the application of that scheme to the former category. This was confirmed once more by the Court of Justice in its judgment of 8 February 2018, Commission v Germany (C-380/16, EU:C:2018:76).

Secondly, the calculation method provided for under the Austrian law on turnover tax is incompatible with Directive 2006/112. Under Article 73 and Articles 306 to 310 of that directive, the taxable amount is to be determined separately for each journey. Austrian law, by contrast, allows the profit margin for ‘groups of services’ or for all journeys in a specific time period to be calculated at a flat-rate. In the abovementioned judgments the Court of Justice also held that a flat-rate calculation of that kind is not consistent with the common system of value added tax.

Source Curia