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ECJ Case C-422/17 (Skarpa Travel) – Judgment – Travel agents scheme; Deposits

On 19 December 2018, the European Court of Justice gave its judgment in case C‑422/17 (Skarpa Travel). This case deals with the VAT travel agents scheme.

Unofficial translation

Facts (simplified):

Skarpa Travel sp. z o.o. w Krakowie (‘Skarpa’) is a travel agent. Skarpa receives payments on account from its customers which may cover up to 100% of the price that they are required to pay. VAT becomes chargeable upon such payment, and on the amount received.

At the same time, Skarpa applies the VAT travel agency scheme. Under this scheme, Skarpa charges VAT on its margin. However, Skarpa’s final margin is still unknown when payments on account are received: the exact amounts to be paid by Skarpa to its suppliers may not yet be fixed or may be subject to change.

Skarpa and the national tax authority disagree as to the exact moment VAT for travel services becomes chargeable. Skarpa takes the view that VAT becomes chargeable when the margin becomes definitely known. The Minister Finansów (Minister for Finance, Poland) considers that VAT is already chargeable when payment on account is made.

Opinion of Advocate General:

The AG gave its Opinion on 5 September 2018. The conclusion were as follows:

(1) VAT becomes chargeable on payments on account received by a taxable person supplying travel services, which are taxed under the special scheme for travel agents, at the time when the respective payment on account is received;

(2) At that moment, VAT is to be calculated on the margin, established as the difference between the sum received as payment on account and the corresponding percentage of the overall projected costs for the given transaction.

Judgment:

The European Court of Justice rules as follows:

  1. Where a travel agency, subject to the special VAT scheme for travel agents, deposits a deposit on the payment of tourist services which it will provide to the traveler, the tax on VAT is due as soon as the advance payment is received, provided that, at that time, the tourist services to be provided are precisely designated.
  2. The margin of the travel agency and, consequently, its taxable amount, is consisting of the difference between the total amount, excluding VAT, to be paid by the traveler and the actual cost incurred by the travel agency upstream in respect of the supply of goods and the provision of services other taxable persons, insofar as these operations directly benefit the traveler.

    When the amount of the deposit corresponds to the total price of the tourist service or a significant part of it and the agency has not yet borne any actual cost, or only a limited part of the total individual cost of this service, or where the actual individual cost of the journey borne by the agency can not be determined at the time of payment of the advance payment, the profit margin may be determined on the basis of an estimate of the total actual cost that it will have, in fine, to bear.

    In view of such an estimate, the agency must take into account, where appropriate, the costs that it has already actually incurred in the collection of the deposit. For the purposes of calculating the margin, the total cost of the journey is deducted the estimated total effective cost and the taxable amount of VAT payable upon receipt of the deposit is obtained by multiplying the amount of this deposit by the percentage represented by the foreseeable profit margin thus determined in the total price of the trip.

Source: Curia (only French version available at the moment)

 

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