From 2022, substantial amendments of the Czech VAT Act relating to the tour operator margin scheme come into force. They are a reaction to the ECJ decisions C-422/17 Skarpa Travel and C-380/16 Commission vs. Germany and they align CZ VAT legislation with the EU VAT directive. However, it looks like they may cause a lot of problems for the tour operators.
There are three areas affected by the changes
- Taxation of individual tours
- Taxation of installments
- Exemption of air transport
Taxation of individual tours (Commission vs. Germany)
Actually, the tax base (margin) can be established in total for the whole tax period. From 2022 margin has to be calculated individually for each tour. Besides this causing an administrative burden for the operators this fact means, that a profitable tour will be taxed whilst loss-making tour’s tax margin will be zero. Until the end of 2021 total of positive and negative margins created the final margin.
Taxation of installments (Skarpa Travel)
Recently VAT has been chargeable when the tour has been completed. From 2022 installments received before the tour have to be taxed. Two options are available for the installment margin calculation – based on actual costs already spent by the travel agent or by the costs expected. This may prove administratively very demanding. Other factors like the foreign exchange rate used may add to the margin calculation to get more complicated.
Exemption of air transport
From 2022 only part of air transport over third countries can be exempted from VAT. Calculation of part of the flight over the EU and third countries has to be calculated. This again adds to a more complicated margin calculation. Actually, tour operators organizing tours to the third countries do not have to bother with the VAT calculation, as the whole tour is VAT exempt. Our experience is that VAT paid to the fiscal administration arising from this change is immaterial. Apparently, financial administrations of certain EU states do not require the VAT from the flights to the third countries at all.
We will inform you about the experience and further development in the area of TOMS in CZ.
Ondřej Štědrý
Tax Adviser
Prague
Czech Republic
