Wish You Weren’t Here – VAT and Travel Services in the EU

It’s World Tourism Day today! Perhaps now is an excellent time to reflect on the mess the EU has got itself into regarding VAT & travel services.

EU Tour Operators Margin Scheme (TOMS) govern how VAT applies to travel services visitors enjoy in the EU. This simplification measure essentially enables travel businesses in the EU to apply a single VAT rate to travel services. The services they supply across the EU (paid at the rate in force in the EU country in which they belong).

There are problems with the existing TOMS rules.

One being, that providers who belong outside the EU are not currently required to pay EU VAT on travel services enjoyed in the EU.

This has long caused concern amongst many EU member states. Although the EU is undertaking a review of TOMS, a number of countries have now lost patience. These countries will be introducing domestic legislation enabling them to bring non-EU suppliers within the scope of VAT in their country.

Leading the way are Croatia.

Who have already introduced domestic legislation to bring non-EU suppliers within the scope of Croatian VAT.

The most significant players, however, are perhaps Germany having already aborted the introduction of their own TOMS rules last year. They have now had enough and will be introducing changes from January 2023. These changes mean that non-EU providers of travel services will be liable to register for VAT in Germany.

Germany and Croatia are not on their own… It is understood that Austria, Portugal, Cyprus, Finland, and Greece may all follow suit, with others to follow no doubt.

In the long term, I expect that the EU will change the EU TOMS rules to bring non-EU suppliers within its scope. Thus enabling a simple one-off EU VAT registration to cover supplies in all EU countries. But until this happens, non-EU providers face the prospect of having to register in multiple EU countries. Only if they are to supply travel services in those countries.

ETC Tax advises a number of travel and leisure businesses on VAT. We would be happy to discuss the above or any other VAT matter with you or your clients.