European Commission v Hellenic Republic.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2013:378
• Court: Court of Justice (European Union)
• Date: 06 June 2013
• Docket Number: C-293/11
• Celex Number: 62011CC0293

OPINION OF ADVOCATE GENERAL

Sharpston

delivered on 6 June 2013 (1)

Case C‑189/11

European Commission

v

Kingdom of Spain

Case C‑193/11

European Commission

v

Republic of Poland

Case C‑236/11

European Commission

v

Italian Republic

Case C‑269/11

European Commission

v

Czech Republic

Case C‑293/11

European Commission

v

Hellenic Republic

Case C‑296/11

European Commission

v

French Republic

Case C‑309/11

European Commission

v

Republic of Finland

Case C‑450/11

European Commission

v

Portuguese Republic

(VAT – Special scheme for travel agents)

1. In this series of infringement actions, the Commission takes issue with an interpretation of Directive 2006/112 (2) under which eight Member States consider that the special VAT margin scheme for travel agents (‘the margin scheme’) set out in Articles 306 to 310 of that directive (Annex I to this Opinion) applies regardless of whether the customer is actually the traveller or not. On the basis of the terminology used in some language versions of the provisions in question, that is referred to as ‘the customer approach’. The Commission asserts that, under the legislation as it stands (and in accordance with the practice in the remaining Member States), the margin scheme applies only where the customer is the traveller. Its interpretation is referred to, on the basis of the terminology in other language versions, as ‘the traveller approach’. That is the essence of the principal issue in all these cases, and of the sole issue in seven of them. I shall address only that issue in the present Opinion.

2. With regard to the Kingdom of Spain alone, the Commission objects also to three further aspects of the national rules relating to the margin scheme, concerning, respectively, the exclusion from the margin scheme of situations in which retail travel agents sell travel packages organised by wholesale agents, the statement of the amount of VAT included in the price and the determination of the taxable amount over a tax period. I address those issues in a separate Opinion, also delivered today.

The Package Travel Directive

3. The definitions included in Article 2 of the Package Travel Directive (3) are not directly relevant here. However, they may provide useful background for understanding the margin scheme. For the purposes of the Package Travel Directive:

‘1. “package” means the pre-arranged combination of not fewer than two of the following when sold or offered for sale at an inclusive price and when the service covers a period of more than 24 hours or includes overnight accommodation:

(a) transport;

(b) accommodation;

(c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package.

…;

2. “organiser” means the person who … organises packages and sells or offers them for sale, whether directly or through a retailer;

3. “retailer” means the person who sells or offers for sale the package put together by the organiser;

4. “consumer” means the person who takes or agrees to take the package …, or any person on whose behalf the principal contractor agrees to purchase the package … or any person to whom the principal contractor or any of the other beneficiaries transfers the package …;

5. “contract” means the agreement linking the consumer to the organiser and/or the retailer.’

The margin scheme

4. The margin scheme has its genesis in Article 26 of the Sixth VAT Directive (Annex II to this Opinion). (4) Its essence is simple. Where a travel agent, acting in his own name, uses the supplies and services of other taxable persons in the provision of travel facilities, all the transactions are to be treated as a single supply, subject to VAT in the travel agent’s Member State. The taxable amount is deemed to be the travel agent’s margin – the difference between the VAT-inclusive cost to him of the supplies and services which he includes in the package which he sells and the price, exclusive of VAT, which he charges for that package.

5. The margin scheme was not included in the Commission’s initial or revised proposals for the legislation, so there is no written legislative history from which any indication as to its purpose may be directly gleaned. However, it is common ground in the present proceedings that the aim was twofold: to simplify matters for travel agents who would otherwise have to deduct or reclaim input VAT in different Member States and to ensure that each service is taxed where it is provided.

6. Without an arrangement such as the margin scheme, a travel agent or tour operator putting together a holiday or travel package within the European Union would be liable for output VAT on the whole price of the package in his own Member State. He would have to recover the VAT charged to him, often in other Member States, for supplies such as transport, accommodation, meals, guided tours, cruises or organised leisure activities to be provided in those Member States. Not only would that involve significant administrative complexity but, as a result, such services would be subject to VAT not in the Member State in which they were in fact provided and consumed but in the Member State in which the package was purchased. Significant VAT revenue might thus be diverted from Member States providing tourist destinations to those providing the tourists.

7. Apart from those effects, however, the margin scheme is in principle neutral as regards the VAT system. Over the chain of supplies as a whole, no more or less is charged than would otherwise be the case, and, in principle, no residual amount becomes irrecoverably embedded at an intermediary stage, so as to burden one or other of the economic operators involved. A comparative example may be helpful in that regard.

8. If the cost of (say, transport, hotel and restaurant) services bought by the travel agent and included in the package is 100, exclusive of VAT, if the travel agent’s net margin on those services is 20 and if VAT is levied at 20% (in all Member States concerned, if there are more than one), then:

– under the normal scheme, the travel agent buys at 100, plus VAT of 20, making a VAT-inclusive price of 120; adding his margin of 20 to the VAT-exclusive price, he sells at 120, plus VAT of 24, making a VAT-inclusive price of 144; he deducts input VAT of 20 and accounts to the tax authority for the difference of 4 between output and input VAT;

– under the margin scheme, the travel agent buys at 100, plus VAT of 20, making a VAT-inclusive price of 120; adding his margin of 20 to the VAT-inclusive price, he sells at 140, plus VAT of 4, making a VAT-inclusive price of 144; he deducts no input VAT but accounts to the tax authority only for the output VAT of 4 on his margin of 20.

In both cases, the VAT-inclusive selling price is 144 and the tax authorities collect VAT of 24, the entire burden of which is borne by the purchaser of the package.

9. Where the services in question are provided in one or more Member States other than that in which the package is sold, under the normal scheme the travel agent cannot simply deduct the input VAT of 20 from his output VAT of 24. Unless he is registered for VAT in those other Member States, he must go through the rather more complicated process of claiming a refund there, (5) for which he might have to wait for some not inconsiderable time, by contrast with the system of immediate deduction when transactions are confined within a single Member State. Moreover, the Member States in question collect no VAT on services supplied in their territory. Under the margin scheme, however, neither difficulty arises.

10. There is no dispute between the parties as to the principles I have set out above. The difference of interpretation concerns only whether, for the margin scheme to apply, the person who buys the package must be the traveller (the person who actually consumes the services or other supplies (6)) or may also be another travel agent. That issue arises in particular, it appears, because it has become increasingly common for travel agents or tour operators (‘organisers’ in the terminology of the Package Travel Directive) to put together holiday or travel packages which they sell to another agent or operator (a ‘retailer’ in the terminology of the Package Travel Directive) before the final sale is made. However, there would be less scope for differing views if the language of the EU legislation were more consistent.

11. In the six languages in which the Sixth Directive was originally drafted (Danish, Dutch, English, French, German and Italian), the word ‘traveller’ or its equivalent was used throughout Article 26, except in the English version, which used ‘customer’ just once, in defining the scope of the scheme in Article 26(1): ‘where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities’. (7)

12. With successive enlargements, that anomaly has spread into various other language versions, and has extended, in some cases, to instances where the English uses ‘traveller’.

13. In the Sixth Directive, the Estonian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Slovak, Slovene and Swedish versions followed the English pattern, using ‘customer’ just once, while the Finnish, Greek, Hungarian and Spanish followed the other original languages in using ‘traveller’ throughout. In Czech, ‘customer’ was used throughout, even where the English used ‘traveller’.

14. In Directive 2006/112, the pattern changed somewhat. The five original (1977) languages other than English (Danish, Dutch, French, German and Italian), together with Czech, Estonian, Greek, Hungarian, Latvian, Lithuanian, Slovene and Spanish, use ‘traveller’ throughout. The English pattern is found in Bulgarian, Maltese, Polish and Swedish. ‘Customer’ is used throughout in Portuguese, Romanian...