Travel Agent's Margin Scheme - Revenue's position following the recent decisions of the CJEU

Purpose of eBrief

This eBrief sets out the position regarding the Travel Agent’s Margin Scheme (TAMS) in respect of the wholesale supply of travel services by tour operators, following the recent decisions of the European Court of Justice (CJEU).

Background

Council Directive 2006/112/EC (EU VAT Directive) provides for a Travel Agent's Margin Scheme for supplies by travel agents and tour operators who buy in and sell travel services such as accommodation, flights, tours etc. The scheme enables a travel agent to account for VAT in the Member State where they are established on supplies of margin scheme services. Without such a scheme, a travel agent would be obliged to register and account for VAT in each Member State where the services are supplied. In this scheme, unlike the normal VAT system, VAT is accounted for on the basis of the travel agent’s margin rather than the full consideration the travel agent receives for the supply. Since VAT is only accounted for on the margin, there is no right to deductibility for the travel agent and tour operators on the bought-in goods or services sold to the customer including a business customer.

The Irish Travel Agent's Margin Scheme does not apply to supplies by a travel agent to another business for onward sale to a traveller (wholesale supplies). Wholesale supplies of travel services are taxed under normal VAT rules and the travel agent is treated as making separate supplies of accommodation, flights etc.

Application of the European Court of Justice Decision

The European Commission brought a series of infringement proceedings against eight Member States (Czech Republic, Finland, France, Greece, Italy, Poland, Portugal and Spain) in connection with the operation of the TAMS. The CJEU ruled that wholesale supplies of travel services should be included in the Travel Agents Margin Scheme.

The implications of the CJEU judgment for the existing legislative provisions in Ireland will have to be examined and if necessary amended. In the interim, travel agents and tour operators should continue to follow the existing provisions as set out in Section 88 of the VAT Consolidation Act 2010 as amended and Value Added Tax Regulations 2010 (SI No 639 of 2010). Full guidance of the operation of TAMS can be found in the Travel Agents Margin Scheme Leaflet. However, in light of the CJEU Decisions, any business that wishes to include wholesale supplies within TAMS may do so.

Further Information

Enquiries regarding any issue contained in this eBrief should be addressed to the Revenue District responsible for the taxpayer's affairs. Contact details for all Revenue Districts can be found on the Contact Details Page.

19 June 2014