Tax and tourism
Last reviewed 21 November 2024
*** ETOA Seminar | Tour Operator Taxation, London 6th December at 14:00 GMT on. For more information click here. Online participation possible.
Recent updates
21 November | From January 1st 2025, Switzerland has announced its intention to impose VAT on all consumer sales of Swiss hotel products that take place outside a “bundled” itinerary. Official guidance available here: DE FR (its correspondence with the regulation is open to question). It appears that any business whose B2C turnover is more than 50% FIT may be within scope of this new proposal. We are urgently seeking clarification, and expect to have more news at our forthcoming seminar on 6th December (see link above).
06 November | EU and VAT Yesterday, the European Council agreed on VAT in the digital age (ViDA) package. Remaining Member State objections to the three main proposals were overcome through a compromise which will affect implementation scope and timeframe. See below for further information.
ETOA Resources on Tax and Tourism
- This page covers EU-level initiatives and sets out our position.
- For our member-only database of tourism taxes per destination, click here.
- See following link for more content on Tour Operators Margin Scheme (TOMS)
Summary
How tourism is taxed is the most influential factor on business viability. The added value of intermediation is often poorly understood. The EU is at a disadvantage for three reasons: it taxes tourism exports, the price of holidays to non-EU destinations is VAT-free, and local taxes have increased significantly. Some European authorities are seeking to collect a tax on B2C sales of European product made outside the EU.
Tax systems need to be efficient, fair and effective. The cumulative effect of additional levies is critical. The increase in devolved tax-raising powers through overnight taxes and access charges was noted as a significant factor in competitiveness by the OECD in 2014. Visitors typically do not vote and they are an easy source of revenue. However, they do notice both price and service level. Both they and business have a choice.
Reform is complex. For example, change in primary EU tax law requires unanimity among all member states. Locally, tax on tourism makes sense if it improves infrastructure and services that benefit residents and visitors. Taxation without benefit to the taxpayer may bring short-term relief to hard-pressed budgets, but it will cause long-term competitive harm despite being a poor mechanism to manage demand.
Current Regulatory Progress
Following the 2024 elections and appointment of Commissioners-designate, the two main regulatory proposals that had previously stalled are likely to progress, While the VAT package for travel and tourism remains problematic due to the diversity of measures it proposes – not just on TOMS VAT, but also passenger transport and duty free – the EU ‘VAT in a Digital Age’ package (ViDA) will make progress following a meeting of ECOFIN on 5th November 2024.
VAT in a Digital Age package (ViDA)
ViDA is intended to set common standards on Digital Reporting Requirements (DRR), impose a duty on platforms to participate in VAT collection through the Deemed Supplier Regime (DSR), and expand the One Stop Shop (OSS), reducing need for multiple VAT registration through use of single registration and expanded use of reverse charge for B2B transactions.
While efficiency gains through increased digitalisation of documents and processes are welcome, the impact on platforms is highly problematic. Intended to minimise VAT leakage, in practice the DSR would be highly problematic for small service providers and platforms, as well as national tax authorities. In November 2023 ETOA added its voice EU Travel Tech and other industry partners in urging caution against its adoption.
ETOA is offering an expert seminar on Tour Operator Taxation on 6th December 2024. For further information and registration, click here.
Further debate is inevitable as ViDA continues its progress through the EU’s legislative process. Remaining Member State objections were overcome late October 2024 through various compromises which will delay implementation: dates still to be confirmed but implementation now likely to be phased from 2027 to 2035. For expert report, see EY summary.
ViDA was covered at an indirect taxation Drop In on 13th November 2023: recording and presentation available here.
ETOA’s policy objectives
- A tax framework that encourages value-adding and Europe’s tourism exports
- Reciprocity: revenue must pay for services or support purposes that benefit residents and visitors*
- Ease of compliance, better consultation and sufficient notice of change
* In the context of sectoral decarbonisation, taxes hypothecated to support the green transition could fall within the definition of reciprocity.
What we are doing
- Lobbying and participation in expert groups on legislative review
- Expert advice through seminars, online briefings and helpline
- Research and reports on policy impact
For further information, please contact policy@etoa.org
Day and Overnight taxes
ETOA monitors over 100 destinations which levy a tourist tax on day or overnight visitors, or a special tax on tourism services, e.g. Amsterdam’s VMR tax. The database of tax rates is a member-only service requiring members to use their website log-in details to view. Information on ETOA’s lobbying position can be found clicking on ‘Read more’ below. ETOA also contributes to partner’s work on this topic, e.g. Group NAO’s ‘Tourism taxes by design.’
Tour Operators Margin Scheme (TOMS)
This is a ‘special scheme’ that applies to agents and operators packaging and selling EU tourism product. It remains an intelligent simplification: it shares tax benefit between destination and operator’s country of establishment; it minimises the need for multiple registration; it is relatively easy to administer. However, it still taxes exports to non-EU clients, partly because the service of packaging is not seen as something clients enjoy in their home country. As of late 2024, it is currently under review as part of a wider regulatory ‘package’ of proposals affecting TOMS, duty free sales and tax on passenger transport.
German VAT
The Federal finance ministry has postponed its proposal to change its treatment of non-EU B2C sales of German tourism product until 1st January 2027. The change is not required by Brussels: it is a unilateral action which risks causing wider disruption as well as harm to Germany inbound. Together with our partners, we continue to argue against it.
