Council Directive 2006/112/EC is a recast of the 6th VAT Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (77/388/EEC). It is the main body of European VAT legislation.

The aim of the Communication is to (i) set out the fundamental characteristics of the new VAT system for the EU and (ii) list the priority actions needed to create a simpler, more efficient and more robust VAT system in the EU. Among the actions envisaged are changes to the VAT rate structure (reduced VAT rates) and the place of supply of passenger transport services. 


Articles 306-310 of Council Directive 2006/112/EC (former Article 26 of the 6th VAT Directive) provides a special VAT scheme for travel service providers, under the so-called "margin taxation scheme". Under the special margin scheme all transactions performed by the travel service providers in respect of a single travel package are treated as a single supply of services for VAT purposes, taxable in their own Member State. They have no right to deduct VAT on supplies made to them, but on the other hand they are only taxed on the profit margin realized on the supply of the travel package.

The Court of Justice of the European Communities has ruled in a number of instances on the interpretation of the various provisions of the margin taxation scheme, notably: 
Other Court rulings relevant for travel service providers but not directly linked to the margin taxation scheme:
  • Supply of services connected with immovable property – Services consisting in facilitating the exchange by owners of rights to occupy holiday homes (View RCI Europe case)
  • Classification of deposits received for the provision of services which are subject to VAT and retained by the provider in the event of cancellation [ View Société thermale d'Eugénie-les-Bains case ]
  • Place of taxation of goods effected on board ships [ View Köhler case ]
  • Exemption of international air transport [ View Idéal Tourisme case ]


Proposal for a Council Directive amending Directive 77/388/EEC as regards the special scheme for travel agents, COM(2002) 64 final

The objective of this Directive proposal is to ensure a more uniform application of the margin taxation scheme by extending the scope of the special scheme to cover the supplies of travel packages to all clients and to abolish the various existing derogations. The proposal also aims at eliminating the distortions of competition from non-EU established tour operators, who currently do not have to comply with the VAT obligations.
In 2015 the Commission withdrew the proposal in light of the fact that Member States have not been able to reach an agreement on this proposal. ECTAA considers that it is of paramount importance to revise the taxation scheme, as it is outdated and creates serious distortions of competition in the market for the supply of travel services.

[ View ECTAA position paper and background document ]

[ View ECTAA press release on the ECoJ ruling in the case brought against Spain and other Member States ]


Council Directive 2008/8/EC of 12th February 2008 as regards the place of supply of services

The Directive determines the place of supply of services: business-to-business supplies of services are taxed where the customer is situated, rather than where the supplier is located. For business-to-consumer supplies of services, the place of taxation will continue to be where the supplier is established. However, there are a number of exceptions to reflect the principle of taxation at the place of consumption. This includes the majority of travel services.

[ View place of supply rules for travel services]

Council Implementing Regulation 282/2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax

The Council implementing Regulation clarifies a number of provisions of the VAT Directive and in particular the place of supply rules which came into force, for the most part, in January 2010 and January 2011. The provisions contained therein concern all service suppliers, but some of them concern specifically suppliers of tourism services, such as clarification of the place of supply of accommodation provided by intermediaries. 

Council Implementing Regulation 1042/2013 amending Implementing Regulation 282/2011 as regards the place of supply of services

The Council implementing Regulation provides further clarification on the place of supply rules, among other as regards the rules relating to admission to cultural events and others, travel services booked over the internet, hiring of means of transport and electronically supplied services to customers in restaurants and hotels as well as on means of transport.


The Directive fixes the minimum standard rate of VAT applicable from 1 January 2011 to 31 December 2015 at 15%.

The Directive allows Member States - on a permanent basis - the optional use of reduced rates of value-added tax (VAT) for certain labour-intensive local services, including restaurant services, for which there is no risk of unfair competition between service providers in different Member States.
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