Tax and tourism
Recent News
ETOA Resources on Tax and Tourism
- This page covers EU-level initiatives and sets out our position.
- For our member-only database of tourism taxes per destination, click here.
- See following link for more content on Tour Operators Margin Scheme (TOMS)
Summary
How tourism is taxed is the most influential factor on business viability. The added value of intermediation is often poorly understood. The EU is at a disadvantage for three reasons: it taxes tourism exports, the price of holidays to non-EU destinations is VAT-free, and local taxes have increased significantly. Some European authorities are seeking to collect a tax on B2C sales of European product made outside the EU.
Tax systems need to be efficient, fair and effective. The cumulative effect of additional levies is critical. The increase in devolved tax-raising powers through overnight taxes and access charges was noted as a significant factor in competitiveness by the OECD in 2014. Visitors typically do not vote and they are an easy source of revenue. However, they do notice both price and service level. Both they and business have a choice.
Reform is complex. For example, change in primary EU tax law requires unanimity among all member states. Locally, tax on tourism makes sense if it improves infrastructure and services that benefit residents and visitors. Taxation without benefit to the taxpayer may bring short-term relief to hard-pressed budgets, but it will cause long-term competitive harm despite being a poor mechanism to manage demand.
Current Regulatory Progress
July 2025 | The European Commission has launched a consultation on the special VAT scheme for travel agents (TOMS) and VAT rules on passenger transport. Of particular interest to ETOA members is how the problem is framed – that non-EU sales benefit from a competitive advantage:
“The special scheme for travel agents is causing important distortions of competition. First, the margin of non-EU travel agents selling travel services in the EU is not taxed due to the rule of taxation at origin. This competitive advantage of non-EU travel agents (which are more easily active in the EU due to digitisation) is valued in the study at 2-4% of the final price. Rigidities in the treatment of B2B supplies (e.g., wholesale supplies and organisation of business events) are also an important cause of distortions as VAT on business travelling cannot be deducted. Finally, Member States apply these rules in very different ways which create intra-EU distortions.”
The Consultation closes on 16th October. Indicative planning suggests the outcome could be a legislative proposal 2026 Q4.
Background
Following the 2024 elections and appointment of Commissioners-designate, the two main regulatory proposals that had previously stalled are likely to progress, While the VAT package for travel and tourism was problematic due to the diversity of measures it proposes – not just on TOMS VAT, but also passenger transport and duty free: the consultation launched in July 2025 removes duty free from scope. The EU ‘VAT in a Digital Age’ package (ViDA) made progress following a meeting of ECOFIN on 5th November 2024.
VAT in a Digital Age package (ViDA)
ViDA is intended to set common standards on Digital Reporting Requirements (DRR), impose a duty on platforms to participate in VAT collection through the Deemed Supplier Regime (DSR), and expand the One Stop Shop (OSS), reducing need for multiple VAT registration through use of single registration and expanded use of reverse charge for B2B transactions.
While efficiency gains through increased digitalisation of documents and processes are welcome, the impact on platforms is highly problematic. Intended to minimise VAT leakage, in practice the DSR would be highly problematic for small service providers and platforms, as well as national tax authorities. In November 2023 ETOA added its voice EU Travel Tech and other industry partners in urging caution against its adoption.
ETOA has held an expert seminar on Tour Operator Taxation on 6th December 2024 with a focus on reforms of VAT and TOMS.
Further debate is inevitable as ViDA continues its progress through the EU’s legislative process. Remaining Member State objections were overcome late October 2024 through various compromises which will delay implementation: dates still to be confirmed but implementation now likely to be phased from 2027 to 2035. For expert report, see EY summary.
ViDA was covered at an indirect taxation Drop In on 13th November 2023: recording and presentation available here.
ETOA’s policy objectives
- A tax framework that encourages value-adding and Europe’s tourism exports
- Reciprocity: revenue must pay for services or support purposes that benefit residents and visitors*
- Ease of compliance, better consultation and sufficient notice of change
* In the context of sectoral decarbonisation, taxes hypothecated to support the green transition could fall within the definition of reciprocity.
What we are doing
- Lobbying and participation in expert groups on legislative review
- Expert advice through seminars, online briefings and helpline
- Research and reports on policy impact
For further information, please contact policy@etoa.org
Destination taxes
ETOA monitors approx. 150 destinations which levy a tourist tax on day or overnight visitors. The database of tax rates is a member-only service requiring members to use their website log-in details to view. Information on ETOA’s lobbying position can be found clicking on ‘Read more’ below. ETOA also contributes to partner’s work on this topic, e.g. Group NAO’s ‘Tourism taxes by design.’
Tour Operators Margin Scheme (TOMS)
This is a ‘special scheme’ that applies to agents and operators packaging and selling EU tourism product. It remains an intelligent simplification: it shares tax benefit between destination and operator’s country of establishment; it minimises the need for multiple registration; it is relatively easy to administer. However, it still taxes exports to non-EU clients, partly because the service of packaging is not seen as something clients enjoy in their home country. In July 2025, a consultation on the scheme’s reform was launched.
German VAT
The Federal finance ministry has postponed its proposal to change its treatment of non-EU B2C sales of German tourism product until 1st January 2027. The change is not required by Brussels: it is a unilateral action which risks causing wider disruption as well as harm to Germany inbound. Together with our partners, we continue to argue against it.
