On January 27, the ECJ issued its judgment in the case C-787/19 (European Commission v Republic of Austria). The European Commission brough the Republic Court of Austria before the Court due to Failure to align with VAT rules for travel agents.
Article in the EU VAT Directive
Article 73 and Articles 306 to 310 of Council Directive 2006/112/EC
Article 73 (Taxable amount)
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.
Article 306 (Special Regime – Travel Agents)
1. Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities.
This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount.
2. For the purposes of this Chapter, tour operators shall be regarded as travel agents.
Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller.
The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services.
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.
If transactions entrusted by the travel agent to other taxable persons are performed by such persons outside the Community, the supply of services carried out by the travel agent shall be treated as an intermediary activity exempted pursuant to Article 153.
If the transactions are performed both inside and outside the Community, only that part of the travel agent’s service relating to transactions outside the Community may be exempted.
VAT charged to the travel agent by other taxable persons in respect of transactions which are referred to in Article 307 and which are for the direct benefit of the traveller shall not be deductible or refundable in any Member State.
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.
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.
1) By excluding from the special value added tax (VAT) regime applicable to travel agencies travel services provided to taxable persons, who use them on behalf of their business, and by authorizing travel agencies, in to the extent that they are subject to that regime, to determine the tax base of VAT as a whole for groups of services or for all services provided during a tax period, the Republic of Austria failed to fulfill 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.
2) The Republic of Austria is ordered to pay the costs.
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