Greece In Trouble Over E.U. Travel Agent VAT Rules

Greece is among the eight Member States that were referred to the European Union’s Court of Justice for failing to properly implement E.U. VAT rules for travel agents, the European Commission announced in late January.

The VAT Directive 2006/112/EC contains special provisions (the so-called “special margin scheme”) for travel agents when they sell travel packages to travelers.

However, Greece, Czech Republic, Finland, France, Italy, Poland, Portugal and Spain, have implemented these special provisions incorrectly, leading to distortions in competition between travel agents.

The “special margin scheme” was included in the VAT Directive to simplify the application of VAT for travel agents, given the fact that elements of the packages they sell may be located in different countries and thus may be subject to different VAT rules.

The European Commission said that the eight countries were not implementing the special margin scheme correctly, often by allowing it to apply to sales between travel agents.

“This creates distortions of competition between travel agencies, as it leads to some agents carrying a heavier tax burden than others,” the commission said.