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Flashback on ECJ Cases – C-450/11 (Commission v Portugal) – TOMS – Differences between language versions — National legislation providing for the application of special scheme to persons who are not travelers — Concepts traveller” and “purchaser”

On September 26, 2013, the ECJ issued its decision in the case C-450/11 (Commission v Portugal).

Context: State failure – Taxation – VAT – Directive 2006/112/EC – Articles 306 to 310 – Special scheme for travel agencies – Differences between language versions – National legislation providing for the application of the special scheme to persons other than travelers – Notions of ‘traveller’ and ‘customer’


Article in the EU VAT Directive

Article 306 to 310 of the EU VAT Directive 2006/112/EC/

Special scheme for travel agents

Article 306
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.

Article 307
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.

Article 308
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.

Article 309
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.

Article 310
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


Facts & questions

  • The Commission considers that the special scheme for travel agents, provided for in Articles 306 to 310 of the VAT Directive, is applicable only in the case of the sale of travel to travelers (hereinafter the “traveller-based approach”) . It criticizes the Portuguese Republic for having authorized the application of that scheme in the event of the sale of travel to all types of customers (‘the customer-based approach’).
  • That institution points out that the provisions of Articles 306 to 310 reproduce, in essence, those of Article 26(1) to (4) of the Sixth Directive.
  • However, the Commission maintains that the intention of the European Union legislature, when adopting the Sixth Directive, was to restrict the special scheme for travel agents to services provided to the traveller, the final consumer. In support of that assertion, it submits that five of the six initial language versions of that directive systematically used the term ‘traveller’ in Article 26 of that directive in a perfectly clear and consistent manner. It follows that that term did not require any effort of interpretation going beyond its literal meaning, so that the interpretation of Article 26 was unequivocal.
  • The use of the term ‘customer’ in the English language version of the Sixth Directive would constitute an error, which moreover was made only once, in Article 26(2). 1, of it. Since that English-language version served as the basis for subsequent translations of the Sixth Directive, that term was often used in those translations, as well as in numerous language versions of Articles 306 to 310 of the VAT Directive.
  • At the hearing before the Court, the Commission explained that the French language version of the Sixth Directive, which used only the term ‘voyageur’, was the text on which all the Member States concerned had worked and committed themselves. Okay.
  • The Commission emphasizes that the provisions relating to the special scheme for travel agents must be interpreted uniformly. The coexistence of the traveler-based approach and the customer-based approach would lead to double taxation and distortion of competition.
  • The Commission explains, with reference to Article 26 of the Sixth Directive, the reasons why, even if the term ‘customer’ appears in certain language versions of Articles 306 to 310 of the VAT Directive, it must nevertheless be understood in the sense of “traveller”.

 


AG Opinion

In the light of all the above considerations, I am of the opinion that – subject to the analysis and conclusions which I set out in my separate Opinion in Case C-189/11 concerning the remaining complaints against the Kingdom of Spain – the Court should:

–        dismiss the actions brought by the Commission,

–        order the Commission to pay the costs incurred by the Member States as defendants, and

–        order the Member States to bear the costs which they have incurred as interveners.


Decision

1) The appeal is dismissed.

2. Orders the European Commission to bear the costs incurred by the Portuguese Republic.

3. Orders the Czech Republic, the Kingdom of Spain, the French Republic, the Republic of Poland and the Republic of Finland to bear their own costs.


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