UHPA-Symposium “Tax P olicy and Application of VAT in T ourism” “ The S pecial VAT- S cheme for T ravel S ervices

1. UHPA-Symposium “Tax Policy and Application of VAT in Tourism”“The Special VAT- SchemeforTravel Services – TOMS“ Dr. Volker M. Jorczyk www.tourismtaxlaw.com

2. Transactions in theTourism Trade TOMS TSS TA TO PTO Consolidator B2B Client B2C Client UHPA-Symposium “Tax Policy and Application of VAT in Tourism”

3. General VAT Principles • Services within the EU generally are subject to VAT, i. e."the supply of goods and services for consideration within theterritory of a Member State by a taxable person acting as such". • Supply of services in the tourism trade • Nature of supply, e. g. accomodation and passenger transport • Place of supply • - accomodation: where hotel is located (= situs principle) • - passenger transport: where transport takes place • (= distance principle) • VAT exemptions, e. g. air + sea cross border UHPA-Symposium “Tax Policy and Application of VAT in Tourism” 3

4. General VAT Principles [cont’d] • VAT rates: standard, reduced, zero • VAT technique:- invoicing- tax returns- reverse charge- EC sales list- registration • Input VAT recovery + exclusions • VAT is owed by B2C-customer in principle. UHPA-Symposium “Tax Policy and Application of VAT in Tourism” 4

5. TOMS – Simplification for TOsand others • TOMS = “lex specialis” for • Any taxable person = TO, TA, hotels • Supplying travel servicesN.B.: Basic travel supplies vs. packable other supplies. • Based on "input travel supplies" from 3rdparties.N.B.: Inhouse-supplies (= own means) not in TOMS. • For the direct benefit of travellers.N.B.: Agency commissions not in TOMS. • For consideration. UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism” 5 5

6. TOMS – VAT Consequences • Single supply instead of multiplicity of supplies. • POS = place of establishment. • Gross margin EU VATable. • VAT owed by TO. • Non-EU margins VAT-exempt. • No input VAT deduction on input travel supplies. • Advantages of TOMS: • - Simple VAT treatment under local VAT regulations! • - No registration in destination countries! • - No need for input VAT refund! UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism” 6 6 6

7. TOMS – Margin Calculation • EU journey: • Travel price 2.000,00 • Input travelsupplies (incl. local VAT) 1.881,00 • Grossmargin 119,00 • Tax rate 19% • VAT on margin 19,00 • Taxbasenet 100,00 • Non-EU journey: • Grossmargin VAT exempt 119,00 • EU+Non-EUjourney: • Grossmarginsplitaccordingtotravelpricesorcostratio. UHPA-Symposium “Tax Policy and Application of VAT in Tourism” 7

8. TOMS – Further Details • Inhouse supplies subject to normal VAT arrangements. • B2B travel supplies (wholesale, business travel, PTO) in TOMS? • Margin calculation: single, group, global. • Destination principle for flights in TOMS-package. • Single supplies in TOMS. • Review of TOMS regulations + future of VAT • Infringement proceedings • Special regulationsforconsolidators • … UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism” 8 8 8 8

9. Annex Article 306 = TOMS basix:TO = TA 1. Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities. This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount. 2. For the purposes of this Chapter, tour operators shall be regarded as travel agents. Article 307 = Single service + POS Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller. The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services. UHPA-Symposium “Tax Policy and Application of VAT in Tourism”

10. Annex [cont’d] Article 309 = Non-EU marginsVAT-exempt If transactions entrusted by the travel agent to other taxable persons are performed by such persons outside the Community, the supply of services carried out by the travel agent shall be treated as an intermediary activity exempted pursuant to Article 153. If the transactions are performed both inside and outside the Community, only that part of the travel agent's service relating to transactions outside the Community may be exempted. Article 310 = Input-VAT on travel supplies non-deductible VAT charged to the travel agent by other taxable persons in respect of transactions which are referred to in Article 307 and which are for the direct benefit of the traveller shall not be deductible or refundable in any Member State. UHPA-Symposium “Tax Policy and Application of VAT in Tourism” UHPA-Symposium “Tax Policy and Application of VAT in Tourism”

11. Abbrev‘s • B2B Business to Business • B2C Business to Customer • TA Travel Agency • TSS Travel Service Supplier, e.g. Hotel, Airline, Coach, Rail, Cruise, • Restaurant,Travel Guide, Ticket • TO Tour Operator • TOMS Tour Operator Margin Scheme • POS Place of Supply • PTO Package Tour Operator UHPA-Symposium “Tax Policy and Application of VAT in Tourism”

12. AnyQuestions? UHPA-Symposium “Tax Policy and Application of VAT in Tourism”

13. Dr. Volker M. Jorczyk Dr. Volker M. JorczykDipl.-Finw., RA, StB TourismTax& Law Rechtsanwaltsgesellschaft mbH Worringer Straße 25 50668 Köln Mobil +49 151 58 40 99 77 Fax.: +49 221 97 31 24 39 E-Mail: vj@tourismtaxlaw.com Internet: www.tourismtaxlaw.com Secretary: +49 221 97 31 24 18ck@tourismtaxlaw.com UHPA-Symposium “Tax Policy and Application of VAT in Tourism”

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