Brussels, 6 October 2009
VAT: Commission takes steps against Spain as regards the applicati on of the travel agents' scheme
The European Commission has formally requested Spain to amend its legislation with regard to the application of the special VAT 'margin' scheme for travel agents. The request is in the form of a reasoned opinion which is the second stage of the infringement proceedings provided for in Article 226 of the Treaty. If Spain fails to comply with the reasoned opinion within two months, the Commission may refer the matter to the Court of Justice of the European Communities.
The VAT Directive includes a special 'margin' scheme aimed at simplifying the application of VAT for travel agents where they sell travel services to travellers . However, the margin scheme does not apply to travel agents who sell holiday packages to customers other than the traveller, in particular to other travel agents who will resell the travel services.
In order to remove unfair competitive advantages which some travel operators benefit from as a result of on the one hand the non-application of VAT to non-EU operators selling holiday packages to EU residents and, on the other hand, an uneven application of the current rules by different Member States, the Commission proposed in 2002 to extend the current special margin scheme to cover sales to travel agents  . ( IP/02/264 )
Unfortunately up until now discussions in the Council have not led to an agreement between the Member States on this proposal.
In order to remove the distortion of competition arising from the uneven application of the current rules, the Commission, in its role of guardian of the Treaty, had to open infringement proceedings against a number of Member States ( ). It is against this background that the present action against Spain must be seen. In the case of this Member State the grievances raised by the Commission are the following:
the application of the special margin scheme in cases where the customer is not the traveller, but a taxable person that will resell the travel services;
the exclusion of the scheme of certain sales made by retail travel agents acting in their own name;
the power granted to the travel agent, under certain circumstances, to mention on the invoice issued by him a flat amount unrelated to the actual VAT charged to the customer which will be deductible for the customer; and
the option given to the travel agent to determine an overall taxable amount for each tax period.
Background on the margin scheme
Without the margin scheme, a travel agent who, for example, purchases restaurant services and car rental services from third parties in other Member States and puts them together in a travel package that he sells in his own name, would be subject to VAT on the services supplied in his own Member State. He would be entitled to a refund of VAT charged abroad on the restaurant services etc. but would have the inconvenience of having to reclaim it from a Member State other than his own. Moreover, the price of the travel package would be very much influenced by the level of tax rate applied in his Member State in spite of the fact that the travel may take place in another Member State.
Therefore, under the margin scheme, all the elements of a single travel package are definitively taxed in the Member State where the travel takes place. The relevant tax is paid by the tour operator without the possibility to obtain input deduction or a refund. On the other hand, for the overall package he sells, he is only subject to VAT in the Member State where he is established with his profit margin (which is his value added).
Press releases on infringement proceedings in the field of taxation and the customs union can be consulted at:
The latest general information on infringement proceedings against Member States can be found at:
 Proposal for a Council Directive amending Directive 77/388/EEC as regards the special scheme for travel agents, COM(2002) 64 final, OJ C 126 of 28 May 2002.