Post by Sapphire Capital on Oct 29, 2008 20:20:03 GMT 4
Germany: Margin taxation in the travel trade
The Supreme Tax Court has confirmed a lower court's decision that a travel agency selling places on foreign camping sites in return for a fixed commission from the site operator did so as a travel agent, rather than as a sales agent. His margin - the commission - was thus subject to VAT in Germany under the margin taxation scheme for tour operators (TOMS), whereas a sales commission would have been chargeable to VAT abroad being connected with a foreign site.
The court reached this conclusion, solely on the basis of the agent's approach to his market. The sites were featured in his catalogue of holidays as "our destinations" and the description of the services and facilities available to the tourist after arrival referred only to us as the provider. The only mention of the agent as an agent acting for a principal was to be found in his general conditions of doing business at the back of the catalogue.
The court found that the travel agent had deliberately fostered the impression on the customers that he was responsible for organising their holidays. The discrete mention of the agency relationship in the general conditions did not detract from this, and neither, though the court did not dwell on this aspect of the case, did the fact that the hire of a place on the camping site was the only service provided by the agent. The agent's relations with the site owner were also of no moment - though clearly of a simple commission nature with no further obligation, liability or risk. Decisive was the way he was seen, and clearly wished to be seen, by the market.
In this case the Supreme Tax Court takes a view apparently at variance with the official VAT guidelines. These see the service as a supply at the foreign camp site and thus not VAT-able in Germany. The reaction of the finance ministry remains to be seen.
Source: ITR / PricewaterhouseCoopers
Volker Jorczyk (volker.jorczyk@de.pwc.com)
Germany +49 211 981 2721
The Supreme Tax Court has confirmed a lower court's decision that a travel agency selling places on foreign camping sites in return for a fixed commission from the site operator did so as a travel agent, rather than as a sales agent. His margin - the commission - was thus subject to VAT in Germany under the margin taxation scheme for tour operators (TOMS), whereas a sales commission would have been chargeable to VAT abroad being connected with a foreign site.
The court reached this conclusion, solely on the basis of the agent's approach to his market. The sites were featured in his catalogue of holidays as "our destinations" and the description of the services and facilities available to the tourist after arrival referred only to us as the provider. The only mention of the agent as an agent acting for a principal was to be found in his general conditions of doing business at the back of the catalogue.
The court found that the travel agent had deliberately fostered the impression on the customers that he was responsible for organising their holidays. The discrete mention of the agency relationship in the general conditions did not detract from this, and neither, though the court did not dwell on this aspect of the case, did the fact that the hire of a place on the camping site was the only service provided by the agent. The agent's relations with the site owner were also of no moment - though clearly of a simple commission nature with no further obligation, liability or risk. Decisive was the way he was seen, and clearly wished to be seen, by the market.
In this case the Supreme Tax Court takes a view apparently at variance with the official VAT guidelines. These see the service as a supply at the foreign camp site and thus not VAT-able in Germany. The reaction of the finance ministry remains to be seen.
Source: ITR / PricewaterhouseCoopers
Volker Jorczyk (volker.jorczyk@de.pwc.com)
Germany +49 211 981 2721