ECJ C-565/24 (P-GmbH & Co. KG) – AG Opinion – TOMS does not apply to excursions combined with goods

On November 27. 2025, the ECJ issued the AG Opinion in the case C-565/24 (P-GmbH & Co. KG).

Context: Reference for a preliminary ruling – Taxation – Common system of value added tax – Directive 77/388/EEC – Article 17 – Right to deduct input tax due or paid – Article 26 – Special scheme for travel agents – Scope – Excursions combined with sale of goods – Margin taxation – Negative margin – No right to deduct

---

Summary

• Case Background: The case involves P-GmbH & Co. KG, which organized excursions and sold goods during those excursions, raising questions about the VAT treatment of these activities. The Bundesfinanzhof referred three specific questions to the Court concerning the applicability of the special tax scheme for travel agents and the treatment of negative margins.
• Questions to the Court: The first two questions address whether excursions organized by P-GmbH fall under the special scheme for travel agents when the fees charged do not cover all costs. The third question inquires if a negative margin allows for a VAT refund under the existing VAT directives.
• Advocate General’s Decision: The Advocate General concluded that the special tax scheme for travel agents does not apply to excursions combined with the sale of goods, particularly when the fees do not cover the full costs of transportation services. This interpretation emphasizes that excursions should be treated under general VAT rules due to the nature of the services provided.
• Justification for the Decision: The Advocate General justified the decision by highlighting that applying the special scheme in this scenario would breach VAT neutrality principles and the right to deduct input tax. Allowing for the deduction of input VAT on transportation services while taxing the goods under general VAT rules ensures consistency and fairness in tax treatment.
• Implications of the Ruling: This ruling reinforces the need for clear distinctions between different types of taxable activities and their corresponding VAT treatments. It aims to prevent potential double taxation and maintain equitable tax treatment for businesses engaged in providing both services and goods.

---

Articles in the EU VAT Directive

Article 306 in 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

The discussion between the tax authorities and the taxpayer involves the treatment of VAT on excursions organized by the taxpayer, P-GmbH & Co. KG, from 1997 to 1999. These excursions, known as “Kaffeefahrten,” were promotional trips aimed at selling goods to participants. The taxpayer collected fares from participants, but the bus costs exceeded these fares, resulting in a negative margin.

Key points of contention include:

• VAT Treatment of Excursions: The taxpayer argues for a full VAT deduction on bus costs, claiming these costs are directly related to the taxable excursions. The tax authorities, however, have denied the full deduction, treating the bus services as part of a broader promotional activity not entirely subject to VAT deduction.
• Application of Special Scheme for Travel Agencies: The case questions whether these excursions fall under the special VAT scheme for travel agencies, which could affect how the VAT is calculated, especially given the negative margin.
• Negative Margin Implications: The authorities and the taxpayer debate whether a negative margin should lead to a VAT refund or adjustment, as under normal VAT rules, a positive margin is typically expected.

The case has been referred to the ECJ to clarify how EU VAT directives apply in this context, particularly concerning the special travel agency scheme and the handling of negative margins.

---

Questions

1. Does an “excursion organized by a trader outside their business premises” as per Article 1(1) of Directive 85/577/EEC qualify as “services provided by a travel agency in the course of a journey” under Article 26(2) of Directive 77/388/EEC?
2. If the first question is affirmed: Should the special scheme for travel agencies under Article 26 of Directive 77/388/EEC be applied even when the margin, which serves as the taxable base under Article 26(2)(3) of the Directive, is negative because the actual costs exceed the “total amount without VAT” paid by the traveler?
3. If both the first and second questions are affirmed: Is Article 12(1) of Directive 77/388/EEC applicable to the margin considered as the taxable base under Article 26(2)(3) of the Directive, even if the margin is negative, resulting in a refund to the taxpayer?

---

AG Opinion

Article 26 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment

must be interpreted as not applying to a situation in which a taxable person purchases tourist services, in particular transportation services, from other taxable persons and subsequently provides them in its own name within the framework of excursions combined with the supply of goods, the purchase of which is not a condition for participation in the excursion, with the taxable person charging participants a fee that does not cover the entire cost of the services purchased from other taxable persons, and the remainder of that cost being covered by revenue from the supply of goods, thus becoming a component of the price of those goods.

---

Decision

 

---

Source

• Curia

---

Similar ECJ Cases

• Travel Vac Case (C-423/97): This case involved criteria for defining excursions organized outside business premises, relevant for interpreting the directives in question.
• IST Case (C-200/04): This case discussed the application of the special VAT scheme for travel agencies, particularly regarding linguistic trips, which are analogous in terms of determining the scope of the VAT scheme.
• Madgett and Baldwin Case (C-308/96 and C-94/97): These cases examined whether activities not traditionally considered travel agency services could fall under the special VAT scheme.
• Skarpa Travel Case (C-422/17): This case provided insights into how the VAT scheme for travel agencies is not an independent tax system but integrates with the general VAT rules, except for specific deviations.
• Minerva Kulturreisen Case (C-31/10): This case emphasized that the special VAT scheme should only apply as far as necessary to achieve the directive’s objectives.
• Commission/Spain (C-189/11): This case discussed the distribution of VAT revenues among member states under the special travel agency scheme.
• Commission/Germany (C-380/16): It addressed how the special scheme simplifies VAT by considering the travel agency’s margin as the taxable base.
• First Choice Holidays (C-149/01): This case focused on the simplification of VAT deduction processes for travel agencies.
• Bogu Case (C-497/09): This case dealt with distinguishing between different types of services for VAT purposes.
• Star Coaches (C-220/11): It examined what constitutes a travel service under the VAT scheme.
• Generali Seguros (C-42/22): This case considered the principle of tax neutrality in the interpretation of VAT rules.
• Commission/Austria (C-787/19): This case addressed issues related to the interpretation of the VAT margin scheme.

---

• Join the Linkedin Group on ECJ/CJEU/General Court VAT Cases, click HERE
• VATupdate.com – Your FREE source of information on ECJ VAT Cases
• Podcasts & briefing documents: VAT concepts explained through ECJ/CJEU cases on Spotify

---

 

---

---