26 November 2020 | Ellman Wall Bennett have published their latest ‘Value Added Travel’ newsletter on UK TOMS arrangements from 1 January 2021
08 July 2020 | Ellman Wall Bennett have published their latest ‘Value Added Travel’ quarterly newsletter. Since its publication, on 8th July the UK announced a six month reduction of the VAT rate to 5% on certain hospitality and tourism services, including food, accommodation and attractions. For operators applying the Tour Operators Margin Scheme (TOMS), David Bennett’s initial assessment is that “a standard interpretation of TOMS would require the rate to remain at 20%: supplies of accommodation etc by a business accounting for VAT under TOMS would not benefit from this reduction. So whilst the sale of accommodation by a hotel to a tour operator or similar (i.e. any business within TOMS) would attract the 5% rate, the margin made by the tour operator would still be subject to 20%.” We will publish any further clarification when we have it.
24 March 2020 | Ellman Wall Bennett have published their latest ‘Value Added Travel’ newsletter.
04 March 2020 | Germany: treatment of VAT for B2B travel services. Ellman Wall Bennett have published additional detail as to practical implications and opportunities for businesses in Germany following VAT rule changes announced in December 2019.
24 February 2020 | The consultation on the legislative roadmap setting out how the European Commission will approach the review of TOMS VAT will close on 3 March 2020.
13 January 2020 | Further to December’s update from Elman Wall Bennett we are advised that the German Finance Ministry has not agreed to a transitional period. Accordingly, TOMS applies to B2B supplies in Germany with effect from 18 December 2019. For those B2B suppliers which recover VAT on German accommodation etc., we understand that this means that VAT on supplies made on or after 18 December is now not recoverable.
8 January 2020 | December’s update from Elman Wall Bennett has just been published and includes updates on application of TOMS in Germany, Austria and Belgium, and a review of possible options in the UK from 2021 onwards.
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.
The cumulative effect of tax 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 any easy source of revenue. They do notice both price and service level, and they have a choice.
The Tour Operators Margin Scheme (TOMS) 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, and provides a competitive advantage to non-EU businesses selling EU product. Relocation is often not open to small businesses on whose success tourism’s job generation depends. There is very little volume in retail sales of EU travel product to non-EU consumers.
For more information on overnight and day taxes, click here.
What you need to know
- The EU is reviewing how TOMS should operate: significant change is likely
- There is an urgent need to illustrate the impact of options on business
- Local taxes are becoming a more significant source of revenue
Reform of TOMS
May 2020: The European Commission has opened the public consultation on future policy options: businesses are encouraged to participate.
April 2020: The European Commission published a roadmap setting out scope of policy review:
November 2019: The European Commission published a technical document summarising developments to date, current position and scope of review.
ETOA’s policy objectives
- Sales to non-EU clients to be VAT-free
- Tax matched by reciprocal benefit enjoyed by residents and visitors
- Ease of compliance, with better consultation and notice of change
What we are doing
- Lobbying and participation in expert group on legislative review
- Expert advice through seminars, online briefings and helpline
- Research and reports
Tax reform is complex. At an EU level, significant regulatory change requires unanimity among all member states. Tax on tourism makes sense if it improves infrastructure and service. Looking after and making accessible Europe’s cultural and natural heritage requires funding. Taxation without benefit to the taxpayer may bring short-term relief to hard-pressed budgets, but it will cause long-term competitive harm.