Michaela Merz

Tour Operators Margin Scheme (TOMS)

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The European Court of Justice published its judgement in an infringement procedure where the EU Commission brought several EU Member States to the Court for failure to comply with their obligations under the EU VAT Directive.

The actions relate to the special scheme for travel agents which is commonly referred to as TOMS (Tour Operators Margin Scheme) and which is relevant from an EU-wide VAT perspective. There has been some uncertainty  – due to the vague language used in the Principal VAT Directive – whether TOMS only applies to supplies to end customers only (“the traveller-based approach” as supported by the EU Commission) or if (as Spain argued) the “customer-based approach” interpretation should prevail, bringing all relevant supplies under TOMS regardless of who the customer is.

The Court held that an approach of applying the special scheme to any type of customer is the best way of achieving the aims of the scheme, being 1) simplifying the rules relating to VAT applicable to travel agents and 2) the fair distribution of the tax revenue to the Member State where the final consumption of services takes place. As a result, the Court dismissed the cases that had been brought against Poland, Italy, The Czech Republic, Greece, France, Finland and Portugal. All of these countries had already authorised the application of TOMS to supplies of travel services to any type of customer.

Regarding Spain, the Court also dismissed the action brought by the European Commissions in so far as it relates to TOMS-relevant supplies to any type of customer. At the same time, the Court found Spanish legislation in breach with the EU rules in so far as they excludes from TOMS sales of travel services organised by wholesale agents but carried out by retail agents.

You can access the full judgment of the court here.

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