The European Commission has a lost a major ruling on the running of the special Travel Agents VAT scheme.
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The European Court of Justice, the highest court of appeal for EU-related legal matters, struck down actions brought by the EC against Italy, Czech Republic, Greece, Finland, France, Spain and Portugal.
The EC had contented that the special scheme only applied to services offered directly the traveller (consumer). However, the above countries had been applying it to the wholesale markets too. It seems that the differences had come down to a simple translation problem between the EU VAT Directive and the local languages.
The ECJ found that the correct application should be the application of the scheme to the entire industry, so offering it wholesale to travel agents enables them to offer it on to the final consumer / traveller in an efficient manner.
The impact of this re-interpretation will be felt in the other 20-member states, which now have to apply the new interpretation. This will mean many hotels and other related services will be drawn into the Travel Agent Scheme. This will take away the advantage of them being able to recover input VAT certain costs.
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