Dear all

The long awaited European Commission paper on the proposed study into the future VAT treatment of travel has been published today.  This is important as it illustrates the current thinking of the Commission and sets out a number of options for change.

The Commission’s invitation to tender document sets out in detail four areas to be studied:


  1. Analysis of the application of the current TOMS rules in all member states.


  1. In depth economic analysis of the travel industry.  The Commission identifies five business models – tour operators, TMCs, DMCs, travel agents and MICE organisers – and requires an analysis of the way each interacts with customers.  Included in the analysis will be non-EU suppliers to the extent they sell to EU customers.  It will be necessary to include in this area an evaluation of the influence of the internet and of the sharing economy.  Finally under this heading, the Commission wishes to know the extent of taxation under TOMS for sales to non-EU customers and also the extent of taxation under TOMS of non-EU travel sold to EU customers (which seems very odd as surely the answer is zero, or at least close to zero).


  1. Evaluation of the TOMS rules identifying and quantifying potential distortions of competition.  This area will involve consideration of the practical effects of the 2013 ECJ decisions.  As regards the treatment of B2B supplies, the effect of TOMS on input VAT recovery should be quantified and attributed to each of the five business models covered in 2 above.  Any competitive advantages for suppliers located in a member state which excludes B2B supplies from TOMS should be considered.  Any advantages enjoyed by suppliers located outside the EU should also be assessed.  Finally, the Commission wants to know about any distortions arising from:

    a) The current rules themselves
    b) Differences in current application by member states
    c) Differing application of the existing rules to EU and non-EU suppliers


  1. Identify, assess and compare reform options.  To my mind, this section is not clear.  The Commission seems to suggest eight options for consideration but will allow additional ideas to be added.  The eight listed are:

    a) Allow member states to retain their existing rules (even where they are not in accordance with a proper interpretation of the scheme, i.e. presumably as interpreted by the ECJ
    b) Retain TOMS as interpreted by the ECJ
    c) Retain TOMS but with application of a reduced rate to the margin
    d) Retain TOMS but with a global margin calculation, i.e. calculation of a single margin achieved on all TOMS supplies in a period
    e) Retain TOMS but with B2B supplies excluded
    f) Retain e above but with an option to include B2B supplies in TOMS
    g) Replace TOMS with “normal” VAT with the place of supply being the place of residence of the customer
    h) Include non-EU suppliers in TOMS


I assume that the above are not meant to be mutually exclusive.


There is not much in the document about the abolition of TOMS but there is a comment that the contractor should consider “if there is still a need for a special scheme”.  The contractor should also consider use of the one stop shop to reduce admin burdens arising in different scenarios and also what is required of a one stop shop if it is used efficiently by suppliers of travel.


The above is only a very short summary of a detailed set of documents which can be found here:


Overall, I think there are numerous points which are unclear and any potential contractor would need to clarify several aspects before submitting a tender, let alone actually doing the study.


I hope this summary is useful, but please do let me know if you have any questions and/or comments.


Best regards


David Bennett
Elman Wall Bennett

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