ECJ C-763/23 (Dragoram) – Order – TOMS applicable if airline tickets are resold

On June 25, 2024, the ECJ issued the Order in the case C-763/23 (Dragoram).

Context: Reference for a preliminary ruling – Article 99 of the Rules of Procedure of the Court of Justice – Questions the answer to which may be clearly deduced from the Court’s existing case-law – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Articles 306 to 308 – Special scheme for travel agents – Scope – Transactions carried out by travel agents consisting of the resale, at a price including a mark-up, of airline tickets purchased from taxable third parties – Absence of additional service

Summary

Preclusion of National Legislation: Articles 306(1) and 308 of the VAT Directive preclude national legislation that allows travel agencies to choose between the special VAT scheme and the normal VAT scheme for international passenger transport.
Special Regime for Reselling Airline Tickets: A travel agency reselling airline tickets purchased from taxable third parties to natural persons, including a margin, falls under the special regime for travel agencies as per Article 306 of the VAT Directive
Taxable Amount Based on Margin: The taxable amount for such transactions is determined by the travel agency’s margin, as outlined in Articles 307 and 308 of the VAT Directive.
Single Service Provision: The service provided by the travel agency, which includes reselling airline tickets with a margin, is considered a single service provision. This includes services specific to a travel agency, such as information and advice³.
Interpretation of Articles 306 and 308: These articles must be interpreted to mean that the supply of airline tickets by a taxable person, resold to natural persons at a price including commission, is subject to the special VAT arrangements for travel agents, even if no additional services are provided.

Articles in the EU VAT Directive

Article 306 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.

Facts & Background

Dragoram Tour, a Romanian travel agency, purchased airline tickets from airlines and resold them to natural persons exempt from VAT, opting for the normal tax regime.
However, the tax authorities considered that the resale of the tickets was subject to the special regime for travel agencies and imposed a VAT supplement of 101,892 RON.
Dragoram Tour appealed the decision, but the appeal was dismissed on the grounds that the company did not have the status of an intermediary and received a commission in addition to the consideration for the airline ticket.
Dragoram Tour then brought an action before the Tribunalul Bacău seeking annulment of the tax notice, the decision on the claim, and the tax audit report.

Questions

(1) Do Articles 306(1) and 308 of the [VAT Directive] preclude national legislation which establishes an exception to the application of the special VAT scheme applicable to travel agencies by granting them, in the case of international passenger transport, the right to choose between the application of the special VAT scheme and the application of the normal VAT scheme (exemption with right to deduct), as follows from Article 311(10)(a) [of the Tax Code] and point 85(6) [of the implementing rules of the Tax Code], in the light of Article 294(1)(g) and Article 271 [of the Tax Code]?

(2) Does a travel agency which carries out transactions consisting of reselling airline tickets purchased from taxable third parties to natural persons for a price including a margin carry out transactions falling within the special regime for travel agencies provided for in Article 306 of the [VAT Directive], so that the taxable amount may be determined by reference to the travel agency’s margin within the meaning of Articles 307 and 308 of that directive, even though those transactions are not accompanied by additional services?

(3) Can the service that the travel agency provides by reselling airline tickets purchased from third parties, but to which it adds a margin, be considered to be a single service provision, since it automatically and intrinsically includes, in addition to the sale or resale of airline tickets, services that are specific to a travel agency, such as information and advice?

Order

Article 306 & 308 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax,

must be interpreted as meaning that:

the supply by a taxable person of airline tickets purchased from other taxable persons and resold to natural persons at a price including commission is subject to the special value added tax (VAT) arrangements applicable to travel agents, regardless of the fact that this supply is not accompanied by additional services other than information and advice services.

Article 306(1) and Article 308 of Directive 2006/112/EC

must be interpreted as meaning that:

they preclude national legislation which introduces an exception to the application of the special value added tax (VAT) scheme for travel agents by granting the latter a right of option to apply the normal VAT scheme in the case of international passenger transport.

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.

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