UK businesses selling travel services taking place in Germany, and possibly other EU member states in due course, may need to consider EU VAT registrations from 1 January 2021.
Under normal VAT rules, most travel services are subject to VAT in the country in which they take place.
Businesses which sell EU travel services in their own name have long been protected from having to register and account for this VAT in the EU country of service by the our Operators Margin Scheme (Toms) rules.
It has always been a point of debate as to whether non-EU businesses can rely on these same Toms rules for protection but, prior to now, no member state has ever fully enforced this.
However, Germany’s finance ministry recently announced it does not consider EU Toms rules to apply to non-EU businesses, effective from 1 January 2021.
This means that UK businesses will need to apply the normal German VAT rules.
In most cases, this will mean a German VAT registration is required for UK businesses supplying German travel services.
We have no confirmation yet as to how other member states may react, and whether they may follow suit.
Initial comments from advisors in other EU member states have not identified any other member states which are actively pursuing this at the moment.
However, the treatment of non-EU tour operators has long been on the agenda of the EU Commission, and this German development is likely to bring focus to this point on an EU-wide basis.
This was always a risk to UK travel businesses once the UK left the EU, and is of course worrying news for those operating EU travel.
At the moment, there is still a great deal of uncertainty, so businesses should not yet spend considerable resources in confirming their position EU-wide.
However, businesses should be cautious of this development and take steps to estimate the possible exposure by considering for each EU country in which their travel services take place:
Laura Chipp is director of travel VAT and Toms advisory firm Vatnav and associate director – head of VAT at travel accounting firm Elman Wall.