On September 26, 2013, the ECJ issued its decision in the cases C-189/11, C-193/11, C-236/11, C-269/11, C-293/11, C-296/11, C-309/11, C-450/11 C-269/11 (Commission v. Spain, Poland, Italy, Czech Republic, Greece, France, Finland, Portugal).
Context: Failure by the State – Taxes – VAT – Directive 2006/112/EC – Articles 306 to 310 – Special scheme for travel agencies – Differences between language versions – National legislation applying the special scheme to persons other than passengers – Definitions, “passenger” and “customer
Article in the EU VAT Directive
Articles 306, 307, 308, 309, 310 of the EU VAT Directive 2006/112/EC.
Article 306 (Special regime travel agencies)
1. Member States shall apply a special VAT regime to services carried out by travel agencies in accordance with this chapter, if travel agencies deal with travelers in their own name and use the supply of goods and services by other taxable persons to carry out the trip.
This special regime does not apply to travel agencies that act only as intermediaries and are subject to the calculation of the tax base in Article 79, first paragraph letter C).
2. For the purposes of this chapter, tour operators are also considered to be travel agencies.
Article 307
Performances carried out by a travel agency under the conditions specified in Article 306 in connection with the execution of a trip are considered to be the only provision of a service by a travel agency to a passenger.
This single provision of service shall be taxed in the Member State in which the travel agency has its seat of economic activity or permanent establishment from which it provided the service.
Article 308
The tax base and the price without VAT in the sense of Article 226 point 8 in the case of a single provision of a service by a travel agency are considered to be the travel agency’s surcharge, i.e. the difference between the total amount without VAT to be paid by the traveler and the travel agency’s actual costs for the delivered goods and services provided by other taxable persons, if these services are for the direct benefit of the passenger.
[…]
Article 310
[VAT], which is charged to the travel agency by other taxable persons for the services referred to in Article 307, which serve for the direct benefit of the passenger, is not deductible or refundable in any Member State [is not deductible or refundable in any Member State].
Facts & Questions (Based on C-269/11)
- On 23 March 2007, the Commission sent a letter of invitation to the Czech Republic stating that, by allowing the special regime for travel agencies to be applied to the provision of services to persons other than the passenger, that Member State was not complying with Articles 306 to 310 of the VAT Directive . The Commission specified that the European Union’s own resources may be reduced as a result.
- The Czech Republic replied by letters of 4 June and 31 July 2007, contradicting the Commission’s interpretation of Articles 306 to 310 of the VAT Directive and the alleged reduction of the Union’s own resources as a result of the approach taken by that Member State.
- Since the Commission was not satisfied with this answer, it issued a reasoned opinion on 29 February 2008 stating that if there is a breach of the VAT Directive and the Union’s own resources are reduced as a result, the Union will be entitled to the entire amount of own resources in question increased by interest for late payment pursuant to Article 11 of Council Regulation (EC, EUROATOM) No. 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system of Community own resources (OJ . Journal L 130, p. 15; Special ed. 01/03, p. 169).
- The Czech Republic responded to this reasoned opinion with a letter dated April 30, 2008, in which it reiterated its disagreement with the Commission’s assertions.
- Under these conditions, the Commission decided to file the present action.
- By resolution of the President of the Court of Justice of 25 October 2011, the Republic of Greece, the Kingdom of Spain, the Republic of France, the Republic of Poland and the Republic of Finland were allowed to enter the proceedings in support of the Czech Republic’s motions.
- The Commission considers that the special scheme for travel agents under Articles 306 to 310 of the VAT Directive can only be applied when the trips are sold to passengers (hereinafter referred to as the “passenger-based approach”). The Commission criticizes the Czech Republic for allowing this regime to be applied in the case of sales of travel to any type of customer (hereafter referred to as the “customer-based approach”).
- This authority recalls that the provisions of these Articles 306 to 310 essentially take over the provisions of Article 26 paragraphs 1 to 4 of the Sixth Directive.
- At the same time, the Commission claims that when the Sixth Directive was adopted, the intention of the EU legislator was to limit the special regime for travel agencies to cases where services are provided to a traveler who is the final consumer. In support of this claim, the Commission points out that five of the six original language versions of the Directive systematically used the term ‘passenger’ in Article 26 of that Directive, in a completely clear and uniform manner. From this, according to the Commission, it follows that it was pointless to try to interpret this expression beyond its literal meaning, so that the interpretation of the said Article 26 was unambiguous.
- According to the Commission, the term “customer” was used in the English version of the Sixth Directive by mistake, which occurred only once, namely in its Article 26, paragraph 1. Given that this English version was the basis for later translations of the Sixth Directive, the term was often adopted in those translations and in a number of language versions of Articles 306 to 310 of the VAT Directive.
AG Opinion
In the light of all the above considerations, I am of the opinion that – subject to the analysis and conclusions which I set out in my separate Opinion in Case C-189/11 concerning the remaining complaints against the Kingdom of Spain – the Court should:
– dismiss the actions brought by the Commission,
– order the Commission to pay the costs incurred by the Member States as defendants, and
– order the Member States to bear the costs which they have incurred as interveners.
Decision
1) The action is dismissed.
2) The European Commission is ordered to reimburse the costs of the proceedings incurred by the Czech Republic.
3. Orders the Hellenic Republic, the Kingdom of Spain, the French Republic, the Republic of Poland and the Republic of Finland to bear their own costs.
Summary
The Commission took issue with an interpretation of the VAT Directive under which eight Member States consider that the special VAT margin scheme for travel agents applies regardless of whether the customer is actually the traveller or not. ECJ dismissed in their entirety the Commission’s actions against the Czech Republic, Finland, France, Greece, Italy, Poland and Portugal and upheld in part the action against Spain. The ECJ decision acknowledged that there are particularly significant differences between the language versions of the directive, some using the term “traveller” and/or the term “customer”, at times varying the use of those terms from one provision to another. ECJ considered that an approach consisting in applying the special scheme to any type of customer is the best way of achieving the aims of the scheme.
Source
- C-269/11 – Curia
Similar ECJ cases
Newsletters
Join the Linkedin Group on ECJ VAT Cases, click HERE
