The Author of the Article
What Topics are Covered in this Article?
The article discusses the Tour Operators Margin Scheme (TOMS) and its implications for businesses organizing event abroad. TOMS is a special VAT scheme for businesses that buy-in and resell travel, accommodation and certain other services as a principal or undisclosed agent.
- The article highlights the importance of being aware of TOMS and its implications for businesses, as it can have a significant impact on VAT liability.
- It explains that TOMS is a complex area of VAT law and that businesses should seek professional advice to ensure compliance.
- The article also provides some practical tips for businesses, such as keeping detailed records of transactions and regularly reviewing the business's TOMS position.
Understanding the Tour Operators Margin Scheme (TOMS)
All transactions performed by a travel agency in respect of a journey are regarded as a single supply. The taxable amount is the profit margin realized by the agency on the supply of a travel package and hence the agency is not entitled to deduct input VAT on transactions directly benefiting the traveller. The place of taxation for the agent's supply is where he has established his business activities.
Hence this special VAT scheme has two aims:
a) to simplify application of EU VAT rules for these supplies, particularly so that a travel agency avoids multiple registration for VAT purposes in each Member State where the services are provided;
b) to ensure that the VAT revenue goes to the Member State in which final consumption of each individual service takes place (NB VAT revenue on services enjoyed in the course of the journey, such as hotels, restaurants or transport, will go to the Member State in which the traveller receives the service, whereas VAT on travel agencies' margins returns to the Member State where the agency is established).
The Importance of TOMS for Businesses Organizing Event Abroad
As a non-profit organization, it is customary practice to invoice the expenses incurred on behalf of participants (such as transportation and accommodation) when organizing events across the EU.
In this context, special attention should be drawn to the "Tour Operator Margin Scheme" (TOMS) regime, as it can have significant implications.
The “Tour Operator Margin Scheme” is a special VAT scheme that applies to businesses active in the organization of travel packages. However, contrary to widespread belief, the TOMS regime applies not only to ordinary travel agencies but can also to organisations supplying travel services eventually in relation to events such as symposiums, conventions, or congresses.
This means that travel services offered at your events, such as transportation of passengers and hotels, may be subject to TOMS when provided by third parties and when your non-profit organization acts in its own name vis-à-vis the participants.
Let's take an example
To highlight the potential consequences, reference is made to the case of a German company which organizes an event in the Czech Republic. As part of the package, transport and accommodation services are also included for the participants.
In principle, the German company would charge Czech VAT to the participants for the registration to the event and accordingly, deduct the VAT levied on costs incurred for the purpose of the event.
However, under the TOMS regime, the VAT implications would be different. The German company would not charge Czech VAT but would instead charge German VAT (calculated according to German travel agency rules) on the travel services. In addition, the German company would not be allowed to deduct input VAT charged on travel costs (transport and hotel accommodation).
So was ruled the case in judgment 10 Afs 179/2020 of the Czech Supreme Administrative Court.
The VAT expert's eye
The scope of TOMS is unfortunately not consistently interpreted throughout EU Countries. It is therefore of utmost importance to know how to deal with the travel costs of participants attending your event to avoid adverse consequences. Please contact us should you consider offering travel services to participants of your events and/or need more details about the above-noted issue.
Maximize your VAT recovery abroad with our expert advice
Are you a business organizing events abroad and recharging accommodation or catering costs to participants?
Our VAT advisory firm can help you navigate the complexities of the Tour Operators Margin Scheme (TOMS) and ensure compliance with VAT regulations.
- Our team of experts has extensive knowledge and experience in dealing with TOMS and its implications for businesses.
- We can provide you with professional advice and practical tips to help you minimize your VAT liability and maximize compliance.
- By working with us, you can have peace of mind knowing that your business is in good hands and that you are taking the necessary steps to ensure compliance with VAT regulations.
We offer a free video conference to assess your situation and provide you with a tailored solution. We look forward to hearing from you soon.