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EU overhaul of tourism operators VAT delay – TOMS

40 years’ old travel and tourism VAT scheme needs reform to reflect market developments – slips into 2024 for proposals

The 2023 review of the tourism VAT regime has been put on hold. The review was looking to revamp the scheme to reflect modern online buying, improving intra-EU transport and the effects of Brexit.

Whilst the aim was to produce a study in early 2023, with proposals for reforms in later 2023, EC has now indicated that it is now paused until at least 2024.

Ongoing review aims

The European Union’s special VAT simplification scheme for tour operators VAT is looking dated. After over 40 years of reducing the VAT obligation and tour operator packages operated across EU states and ensuring a fair allocation of VAT revenue across Member States, it needs bringing into the 21st Century .

The UK’s 2021 exit from the EU VAT regime and advantages the scheme gives to such third-party tour operators has amplified the need for reform.

The European Commission review is part of the EU Tax Action Package reforms, announced in 2020.

New EC TOMS review proposals

The European Commission launched the study to evaluate the need to reform the scheme. The review is considering the following:

  1. special scheme for travel agents,
  2. VAT rules on passenger transport and
  3. exemption on supply of goods to non-EU travellers.

Tour Operators Margin Scheme (TOMS)

TOMS was introduced in 1977. It treats the all pan-EU transactions made by a tour operator in their own name as a single supply in their country of residence. And VAT due is then only due on the difference between cost and sales price – ‘margin’. There is no right to deduct any input VAT incurred in return for this simplification. This reduces the obligation for tour operators to VAT register in all the EU states where they are buying and reselling holiday services (transport, hotels etc).  This applies to both to B2C and B2B holiday packages.

The scheme has largely been left unchanged since then. The sector as advanced significantly, most notably the role of digitalisation and the role of online travel marketplaces and platforms. Issues include:

  • Unfair competitive advantage for non-EU operators who face no taxation for travel services sold in the EU. With the rise of digital platforms and the UK exit from the EU, this has become a pressing issue.
  • B2B travel, which is included, does give rise to distortions. The input tax cannot be deducted, so it is necessary for travel businesses to pass on VAT inclusive costs to their customers. This hits the conference and event organising sector most acutely who are at a disadvantage from direct selling from conference venues or hotels.
  • There are varying and confusing applications of the rules by the 27 member states. Harmonisation for the efficient and fair operation of the scheme needs to be imposed.

EU VAT reforms

Reform (click for details) Update
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2035 Harmonisation of EU e-invoicing and domestic regimes Jan 2035
2030 Digital Reporting Requirements and e-invoicing harmonisation July 2030
Structured e-invoices supercede paper invoices July 2030
EC Sales lists replaced by Digital Reporting Requirements July 2030
2028 EU Customs reforms Published May 2023
€150 import consignment threshold removed Published May 2023
2027 Single VAT Registration in the EU - extension of OSS July 2027
Call-off stock VAT simplification ends July 2027
Harmonisation of B2B Reverse Charge rules July 2027
Proposal for VAT treatment of the platform economy July 2027
2026 DAC8 harmonised crypto asset reporting Approved May 2023
2025 VAT registration thresholds equivalence foreign businesses 1 Jan 2025
Virtual events VAT rule changes 1 Jan 2025
Financial Services VAT exemption reform proposals Consultation complete; proposal awaited
Tour operator margin scheme VAT reforms EC undertaking fresh review
2024 Payment providers' seller transaction reporting and bookkeeping obligations In effect since 1 Jan 2024
2023 DAC 7 - marketplace reporting harmonisation In effect since 1 Jan 2024
2022 IOSS reforms to prevent double taxation On hold
EU reduced VAT rate freedoms Entered into force 6 April 2022
VAT in the Digital Age proposals Published Dec 2022
EU DAC8 cryptocurrency tax reporting proposals Published Dec 2022
VAT Gap Initiative Q3 2022
EU Definitive VAT System On hold
2021 One-Stop-Shop (OSS) single EU VAT return In effect since 1 July 2021
Ending €22 import VAT exemption; new IOSS return In effect since 1 July 2021
Marketplace deemed supplier EU VAT reforms In effect since 1 July 2021
2020 EU four Quick Fixes for VAT In effect
Tax authorities anti-VAT fraud cooperation In effect
Tax Action Plan - 25 VAT and other tax reforms roadmap See 'VAT in the Digital Age' and others
2019 Simplification of e-services VAT compliance and thresholds In effect
Single and multi-use vouchers In effect
2018 Lower e-book and publications VAT rates In effect, although not all EU states have adopted the option


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