C-422/17 Skarpa Travel

JUDGMENT OF THE COURT (Fourth Chamber)

19 December 2018 ( *1 )

(Reference for a preliminary ruling — Harmonisation of tax legislation — Common system of value added tax (VAT) — Directive 2006/112/EC — Chargeable event — Special scheme for travel agents — Articles 65 and 308 — Margin obtained by a travel agent — Determination of the margin — Payments on account made before the supply of travel services by the travel agent — Actual cost borne by the travel agent)

In Case C‑422/17,

REQUEST for a preliminary ruling under Article 267 TFEU from the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), made by decision of 16 February 2017, received at the Court on 13 July 2017, in the proceedings

Szef Krajowej Administracji Skarbowej

v

Skarpa Travel sp. z o.o.,

THE COURT (Fourth Chamber),

composed of T. von Danwitz, President of the Seventh Chamber, acting as President of the Fourth Chamber, K. Jürimäe, C. Lycourgos, E. Juhász (Rapporteur) and C. Vajda, Judges,

Advocate General: M. Bobek,

Registrar: M. Aleksejev, Head of Unit,

having regard to the written procedure and further to the hearing on 7 June 2018,

after considering the observations submitted on behalf of:

the Szef Krajowej Administracji Skarbowej, by J. Kaute and M. Kowalewska, acting as Agents,

Skarpa Travel sp. z o.o., by J. Zając-Wysocka, radca prawny,

the Polish Government, by B. Majczyna and A. Kramarczyk-Szaładzińska, acting as Agents,

the German Government, by T. Henze, acting as Agent,

the European Commission, by M. Siekierzyńska and N. Gossement, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 5 September 2018,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Articles 65 and 308 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2010/45/EU of 13 July 2010 (OJ 2010 L 189, p. 1) (‘the VAT Directive’).

2The request has been made in the context of proceedings between the Szef Krajowej Administracji Skarbowej (Head of the National Revenue Administration, Poland) and Skarpa Travel sp. z o.o. (‘Skarpa’) concerning a tax opinion issued by the Minister Finansów (Minister for Finance, Poland; ‘the Minister’) relating to the chargeability and method of calculation of value added tax (VAT) in the event of the receipt of a payment on account for a tourist service supplied by a travel agent.

Legal context

European Union law

3Pursuant to Article 63 of the VAT Directive, ‘the chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.’

4Article 65 of that directive provides:

‘Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.’

5Article 66 of the VAT Directive is worded as follows:

‘By way of derogation from Articles 63, 64 and 65, Member States may provide that VAT is to become chargeable, in respect of certain transactions or certain categories of taxable person at one of the following times:

no later than the time the invoice is issued;

no later than the time the payment is received;

where an invoice is not issued, or is issued late, within a specified time no later than on expiry of the time limit for issue of invoices imposed by Member States pursuant to the second paragraph of Article 222 or where no such time limit has been imposed by the Member State, within a specified period from the date of the chargeable event.

The derogation provided for in the first paragraph shall not, however, apply to supplies of services in respect of which VAT is payable by the customer pursuant to Article 196 and to supplies or transfers of goods referred to in Article 67.’

6Article 306 of the VAT Directive provides:

‘1. Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities.

This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount.

2. For the purposes of this Chapter, tour operators shall be regarded as travel agents.’

7Article 307 of the VAT Directive is worded as follows:

‘Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller.

The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services.’

8Under Article 308 of that directive: ‘The taxable amount and the price exclusive of VAT, within the meaning of point (8) of Article 226, in respect of the single service provided by the travel agent shall be the travel agent’s margin, that is to say, the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller.’

9Article 309 of that directive provides:

‘If transactions entrusted by the travel agent to other taxable persons are performed by such persons outside the [European Union], the supply of services carried out by the travel agent shall be treated as an intermediary activity exempted pursuant to Article 153.

If the transactions are performed both inside and outside the [European Union], only that part of the travel agent’s service relating to transactions outside the [European Union] may be exempted.’

10Under Article 310 of the VAT Directive, ‘VAT charged to the travel agent by other taxable persons in respect of transactions which are referred to in Article 307 and which are for the direct benefit of the traveller shall not be deductible or refundable in any Member State.’

Polish law

11Article 19a(8) of the Ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 11 March 2004 (Dz. U. No 54, position 535), as amended, (‘the Law on VAT’) provides:

‘Where, before goods or services are supplied, all or part of the payment is received — in particular: prepayments, payments on account, deposits, instalments and construction or housing contributions prior to the establishment of a right in cooperative residential or other premises — tax shall become chargeable on receipt of the payment and on the amount received, without prejudice to paragraph 5(4).’

12Article 119 of that Law provides:

‘1. The taxable amount in respect of the provision of tourist services shall be the amount of the margin, reduced by the amount of tax due, without prejudice to paragraph 5.

2. The “margin” referred to in paragraph 1 shall mean the difference between the amount to be paid by the purchaser of the service and the actual cost incurred by the taxable person in purchasing goods and services from other taxable persons for the direct benefit of the traveller; “services for the direct benefit of the traveller” shall mean services forming part of the tourist services provided and, in particular, transport, accommodation, meals and insurance.’

13The referring court points out that, since 1 January 2014, the provisions of national law based on Article 66 of the VAT Directive, determining the date on which that tax becomes chargeable on payments on account for tourist services provided by a travel agent, have no longer been in force in Poland.

The dispute in the main proceedings and the questions referred for a preliminary ruling

14Skarpa, as a travel agent, is subject to the special scheme for travel agents, as provided for in Article 119 of the Law on VAT. Taking the view that the date on which VAT on payments on account received by travel agents becomes chargeable is not apparent from that legislation, it made a request for a tax opinion to the Minister.

15In his tax opinion, the Minister stated that VAT is chargeable at the time when payments on account are made. According to the Minister, in order to determine the travel agent’s margin, which amounts to the taxable amount for purposes of VAT, Skarpa can deduct from its gross margin the estimated costs that it will have to incur, relating to the supply in question, and make, later, as appropriate, the necessary adjustments, once it is in a position to determine the final amount of the costs actually incurred.

16Skarpa, taking the view that the VAT on its services should become chargeable only when it is in a position to determine its final profit margin, contested that tax opinion before the Wojewódzki Sąd Administracyjny w Krakowie (Regional Administrative Court, Cracow, Poland).

17By judgment of 25 November 2014, that court annulled that opinion, on the ground that, since Article 119(2) of the Law on VAT refers only to costs actually incurred by the service provider, VAT becomes chargeable only at the time when the actual margin has been definitively determined. It ruled that an estimate of the taxable amount is not provided for when the payment on account relates to the provision of tourist services by a travel agency. That court also took the view that the adjustment of tax returns should be carried out only by way of exception and cannot become the rule.

18The Minister appealed against that judgment to the referring court, the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), claiming that, with the exception of the situations mentioned in the Law on VAT, all payments on account are subject to tax as soon as they are received. The Minister accepts that the actual costs incurred by the taxable person up to the receipt of the payment on account can be taken into account in order to calculate the profit margin. However, the fact that it is impossible to determine the actual margin at the time when the payment on account for a tourist service supplied by a travel agent is made cannot have the consequence that VAT becomes chargeable only when that margin can be definitively determined.

19The referring court is uncertain whether the special rule on the determination of the taxable amount for services supplied by travel agents, laid down in Article 308 of the VAT Directive, affects the determination as to when VAT on those services becomes chargeable. Since the costs actually incurred by the travel agent will be known only after the tourist service has been supplied to its customer, the referring court takes the view that Article 65 of the VAT directive cannot apply in a situation covered by Article 308 of that directive. That court acknowledges, however, that the VAT Directive does not contain provisions to that effect and that such an approach can be inferred only from its general framework.

20Furthermore, in so far as VAT becomes chargeable, in accordance with Article 65 of the VAT Directive, at the time of receipt of the payment on account by the travel agent, the referring court is unsure whether that tax must be calculated on the amount received or whether the specific method of determining the taxable amount laid down in Article 308 of that directive must be taken into account. In that regard, it states that, on the one hand, the taxation of the entire amount of the payment on account could result in a very heavy burden for the travel agent, even provisionally, but, on the other hand, to allow a travel agent to take account, for the purpose of determining the taxable amount in question at the time when a payment on account is made by a customer, of the price of services yet to be paid would be incompatible with the special scheme for travel agents.

21In those circumstances, the Naczelny Sąd Administracyjny (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Must [the VAT Directive] be interpreted as meaning that tax becomes chargeable on payments on account received by a taxable person supplying tourist services, which are taxed under the special scheme for travel agents provided for in Articles 306 to 310 of [the VAT Directive], at the time defined in Article 65 of that directive?

If the answer to the first question is in the affirmative, must Article 65 of [the VAT Directive] be interpreted as meaning that, for taxation purposes, a payment on account received by a taxable person supplying tourist services, taxed under the special scheme for travel agents provided for in Articles 306 to 310 of [the VAT Directive], is reduced by the cost referred to in Article 308 of [that directive] actually incurred by the taxable person up to the time when he receives the payment on account?’

Consideration of the questions referred

The first question

22By its first question, the referring court asks in essence whether Articles 65 and 306 to 310 of the VAT Directive must be interpreted as meaning that, when a travel agent, subject to the special scheme laid down in Articles 306 to 310, receives a payment on account for tourist services which it will provide to the traveller, VAT is chargeable, in accordance with Article 65, on receipt of that payment on account.

23Skarpa argues that, in order to determine the relevant taxable amount, in accordance with Article 308 of that directive, the travel agent must calculate its actual profit margin, which is, however, impossible without knowing the actual input costs which it will have to incur, in respect of the purchase of goods and services from other taxable persons. Accordingly, the tax is chargeable only when all the costs actually incurred by the travel agent are known and the margin obtained is definitive. Article 65 of that directive, it submits, cannot therefore apply in such a case.

24It must be noted that the special VAT scheme applicable to travel agents, laid down in Articles 306 to 310 of the VAT Directive, contains rules specific to the activity of travel agents, which derogate from the normal VAT regime (see, to that effect, judgment of 25 October 2012, Kozak, C‑557/11, EU:C:2012:672, paragraph 16).

25According to Article 306 of the VAT Directive, Member States must apply the special VAT scheme to transactions carried out by travel agents who deal with customers in their own name, and not as an intermediary, and who use supplies of goods or services provided by other taxable persons, in the provision of travel facilities.

26For the operations of travel agents, carried out in accordance with Article 306, the EU legislature has laid down, in Articles 307 to 310 of the VAT Directive, specific provisions relating to the place of taxation, the calculation of the taxable amount for VAT and its deductibility.

27The Court has already ruled that, as an exception to the normal system applicable under the VAT Directive, the scheme laid down in Articles 306 to 310 thereof must be applied only to the extent necessary to achieve its objective (see, to that effect, judgment of 25 October 2012, Kozak, C‑557/11, EU:C:2012:672, paragraph 20 and the case-law cited).

28According to the case-law of the Court, the essential aim of the rules of that special scheme is to avoid the difficulties to which economic operators would be exposed by application of the normal principles of the VAT Directive concerning transactions involving the supply of services bought in from third parties, since the application of the normal rules on the place of taxation, taxable amount and deduction of input tax would, by reason of the multiplicity of services and the places in which they are provided, entail practical difficulties for those undertakings of such a nature as to obstruct their operations (see, to that effect, judgment of 25 October 2012, Kozak, C‑557/11, EU:C:2012:672, paragraph 19 and the case-law cited).

29It follows that the special VAT scheme applicable to travel agents does not, as such, amount to an independent and exhaustive tax scheme, but includes solely provisions that derogate from certain rules of the general VAT system, with the result that the other rules of that general system apply to the transactions of travel agents subject to VAT.

30Accordingly, all the provisions of the general VAT system may apply to transactions covered by the special scheme for travel agents, except those governing the place of taxation, the calculation of the taxable amount and its deductibility.

31Consequently, the rules relating to the chargeable event and to chargeability of VAT on supplies of goods and services, set out in, inter alia, Articles 63 and 65 of the VAT Directive, remain applicable to transactions covered by the special scheme for travel agents.

32Under Article 63 of that directive, the chargeable event occurs and tax becomes chargeable when the goods or services are supplied.

33Nevertheless, Article 65 of the VAT Directive provides that, where payments are made on account before the goods or services are supplied, VAT becomes chargeable on receipt of the payment and on the amount received. That article constitutes a derogation from the rule laid down in Article 63 of that directive and, as such, must be interpreted strictly (see, to that effect, judgment of 13 March 2014, FIRIN, C‑107/13, EU:C:2014:151, paragraph 35 and the case-law cited).

34Thus, in order for VAT to become chargeable in such circumstances, all the relevant information concerning the chargeable event, namely, the future supply of services, must already be known and therefore, in particular, the services must be precisely designated at the time when the payment on account is made (judgment of 13 March 2014, FIRIN, C‑107/13, EU:C:2014:151, paragraph 36 and the case-law cited).

35In the present case, the referring court states that, at the time of receipt of a payment on account by a travel agent, such as Skarpa, that payment on account can be linked to a service performed by that agent, such as, for example, a trip to be made on a particular date and to a particular country. It thus appears, subject to verification by that court, that such a payment on account relates to a service precisely designated, with the result that VAT becomes chargeable when the payment on account is received in accordance with Article 65 of the VAT Directive.

36In those circumstances, the answer to the first question is that Articles 65 and 306 to 310 of the VAT Directive must be interpreted as meaning that, when a travel agent, subject to the special scheme laid down in Articles 306 to 310 of that directive, receives a payment on account for tourist services which it will provide to the traveller, VAT is chargeable, in accordance with that Article 65, on receipt of that payment on account, provided that, at that time, the tourist services to be supplied are precisely designated.

The second question

37By its second question, the referring court seeks clarification regarding the method of taxation of a payment on account received by a travel agent.

38According to Article 308 of the VAT Directive, the taxable amount, in respect of the single service provided by the travel agent, is the travel agent’s profit margin, that is to say, the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of the supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller.

39As has been pointed out in paragraphs 26 and 28 of the present judgment, that rule establishes the taxable amount for VAT in situations in which travel agents purchase goods or services from other taxable persons and forms part of the specific provisions laid down by the EU legislature in order to take account of the specific features of the activity of travel agents and to prevent them from encountering practical difficulties of such a kind as to hinder the exercise of their activity.

40It follows that the interpretation of the provisions of the VAT Directive cannot have the consequence of making it impossible, in practice, to calculate the precise taxable amount laid down specifically in Article 308 of that directive, which presupposes that the travel agent can deduct from the total price, exclusive of VAT, paid by the traveller all of the actual costs which it has incurred for supplies of goods and services provided by other taxable persons, where those transactions are for the direct benefit of the traveller.

41In the case where the payment on account paid by the customer corresponds to the total price or to a significant part of the price of the tourist service and where, at the time when payment is made, the travel agent has not yet incurred any actual cost, or has incurred only a limited part of the individual total cost of that service, the taking into account of only the actual cost incurred by the travel agent at the time when payment is made can, in certain cases, prevent it from deducting that cost in full or in part from the total price, excluding VAT, of that service and can, therefore, distort the method for calculating the taxable amount as laid down in Article 308 of the VAT Directive.

42Furthermore, a travel agent may not be in a position to determine the actual cost of the specific tourist service for a traveller at the time when that traveller makes the payment on account relating to that service.

43Consequently, in situations such as those covered by the two preceding paragraphs, the travel agent’s profit margin can be determined on the basis of an estimate of the total actual cost which it will, ultimately, have to incur. For the purpose of such an estimate, the travel agent must take into account, where relevant, the costs that it has already actually incurred at the time of receipt of the payment on account.

44By deducting the estimated total actual cost from the total price of the trip, the travel agent obtains its projected profit margin. The taxable amount for VAT to be paid at the time of receipt of the payment on account is obtained by multiplying the amount of that payment on account by the percentage corresponding to the part of the total cost of the trip that the estimated profit margin, thus determined, represents.

45As the Advocate General noted in point 51 of his Opinion, a travel agent of average diligence can reasonably be expected to prepare a rather detailed estimate of the total cost of an individual trip, in order to determine the total price of that trip.

46The projected costs thus estimated must be linked to the actual tourist service in respect of which the payment on account was received by the travel agent, since that profit margin and the taxable amount must be determined by reference to each individual supply of services provided by the travel agent, namely individually and not globally, having regard to groups of services or all services supplied during a given period (see, to that effect, judgment of 8 February 2018, Commission v Germany, C‑380/16, not published, EU:C:2018:76, paragraphs 89, 91 and 92).

47That solution has no bearing on the fact that, as soon as the definitive actual individual cost of the trip is known to the travel agent, that cost must be taken into account for the determination of VAT, in accordance with Article 308 of the VAT Directive, by correcting, as necessary, the VAT returns prepared at the time of receipt of the payment on account.

48In the light of the foregoing, the answer to the second question is that Article 308 of the VAT Directive must be interpreted as meaning that the margin of the travel agent, and, consequently, its taxable amount, corresponds to the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual input cost incurred by the travel agent in respect of supplies of goods and services provided by other taxable persons, in so far as those transactions are for the direct benefit of the traveller. When the amount of the payment on account corresponds to the total price of the tourist service or to a significant part of that price, and the travel agent has not yet incurred any actual cost, or has incurred only a limited part of the individual total cost of that service, or even when the individual actual cost of the trip incurred by the travel agent cannot be determined at the time when the payment on account is made, the profit margin can be determined on the basis of an estimate of the total actual cost which it will ultimately have to incur. For the purpose of such an estimate, the travel agent must take into account, where relevant, the costs which it has already actually incurred at the time of receipt of the payment on account. For the purpose of the calculation of the margin, the estimated total actual cost is deducted from the total price of the trip and the taxable amount for VAT to be paid at the time of receipt of the payment on account is obtained by multiplying the amount of that payment on account by the percentage corresponding to the part of the total cost of the trip that the estimated profit margin, thus determined, represents.

Costs

49Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fourth Chamber) hereby rules:

Articles 65 and 306 to 310 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010, must be interpreted as meaning that, when a travel agent, subject to the special scheme laid down in Articles 306 to 310 of that directive, receives a payment on account for tourist services which it will provide to the traveller, the value added tax (VAT) is chargeable, in accordance with that Article 65, on receipt of that payment on account, provided that, at that time, the tourist services to be supplied are precisely designated.

Article 308 of Directive 2006/112, as amended by Directive 2010/45, must be interpreted as meaning that the margin of the travel agent, and, consequently, its taxable amount, corresponds to the difference between the total amount, exclusive of value added tax (VAT), to be paid by the traveller and the actual input cost incurred by the travel agent in respect of supplies of goods and services provided by other taxable persons, in so far as those transactions are for the direct benefit of the traveller. When the amount of the payment on account corresponds to the total price of the tourist service or to a significant part of that price, and the travel agent has not yet incurred any actual cost, or has incurred only a limited part of the individual total cost of that service, or even when the individual actual cost of the trip incurred by the travel agent cannot be determined at the time when the payment on account is made, the profit margin can be determined on the basis of an estimate of the total actual cost which it will ultimately have to incur. For the purpose of such an estimate, the travel agent must take into account, where relevant, the costs which it has already actually incurred at the time of receipt of the payment on account. For the purpose of the calculation of the margin, the estimated total actual cost is deducted from the total price of the trip and the taxable amount for VAT to be paid at the time of receipt of the payment on account is obtained by multiplying the amount of that payment on account by the percentage corresponding to the part of the total cost of the trip that the estimated profit margin, thus determined, represents.

Signatures

[Signatures]

( *1 ) Language of the case: Polish.

OPINION OF ADVOCATE GENERAL

BOBEK

delivered on 5 September 2018 ¹

(Reference for a preliminary ruling — Value added tax (VAT) — Payments on account — Chargeable event — Special scheme for travel agents — Determination of the margin — Actual cost to the travel agent)

I. Introduction

1Skarpa Travel sp. z o.o. w Krakowie (‘Skarpa’) is a travel agent. Skarpa receives payments on account from its customers which may cover up to 100% of the price that they are required to pay. According to the general provisions of EU rules on value added tax (VAT), when payments on account are made before services are actually supplied, VAT becomes chargeable upon such payment, and on the amount received.

2At the same time, Skarpa’s services are subject to VAT rules provided for under the special scheme for travel agents. Under this scheme, Skarpa charges VAT on its margin. However, Skarpa’s final margin is still unknown when payments on account are received: the exact amounts to be paid by Skarpa to its suppliers may not yet be fixed or may be subject to change.

3Skarpa and the national tax authority disagree as to the exact moment VAT for travel services becomes chargeable. Skarpa takes the view that VAT becomes chargeable when the margin becomes definitely known. The Minister Finansów (Minister for Finance, Poland) considers that VAT is already chargeable when payment on account is made.

4It is in this context that the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) asks, in essence, whether the general rule on chargeability for payments on account applies to services that fall under the special margin scheme for travel agencies. If so, that referring court wishes to know the amount on which VAT should be charged given that the final margin can be only determined after the payments on account are made.

II. Legal framework

A. EU law

5Article 63 of Directive 2006/112/EC ² (‘the VAT Directive’) provides that ‘the chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied’.

6Article 65 of the same directive specifies that ‘where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received’.

7Furthermore, by way of derogation from Articles 63, 64 and 65, Article 66 of the VAT Directive allows Member States to provide that VAT is to become chargeable at one of three different times.

8Articles 306 to 310 of the VAT Directive contain rules on a special scheme for travel agents. Articles 306 to 308 read as follows:

1. Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities.

This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount.

2. For the purposes of this Chapter, tour operators shall be regarded as travel agents.

Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller.

The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services.

The taxable amount and the price exclusive of VAT, within the meaning of point (8) of Article 226, in respect of the single service provided by the travel agent shall be the travel agent’s margin, that is to say, the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller.’

B. National law

9The Ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law of 11 March 2004 on the tax on goods and services) (Dz. U. 2011, No 177, heading 1054, as amended) (‘the Law on VAT’) provides as follows:

Where, before goods or services are supplied, all or part of the payment is received — in particular: prepayments, payments on account, deposits, instalments and construction or housing contributions prior to the establishment of a right in cooperative residential or other premises — tax shall become chargeable on receipt of the payment and on the amount received, without prejudice to paragraph 5(4).

…

1. The taxable amount in respect of the provision of tourist services shall be the amount of the margin, reduced by the amount of tax due, without prejudice to paragraph 5.

2. The margin referred to in paragraph 1 shall mean the difference between the amount to be paid by the purchaser of the service and the actual cost incurred by the taxable person in purchasing goods and services from other taxable persons for the direct benefit of the traveller; services for the direct benefit of the traveller shall mean services forming part of the tourist services provided and, in particular, transport, accommodation, meals and insurance.’

10According to the order for reference, Poland made use of Article 66 of the VAT Directive and applied a specific rule to the payments on account for tourist services. ³ It was confirmed by the Polish Government at the hearing that as of 1 January 2014, the act containing that rule was repealed without apparently being replaced by any other specific provisions for travel services. ⁴

III. Facts, procedure and the questions referred

11Skarpa is a travel agent. Its services fall under the special scheme for travel agents (‘the special scheme for travel agents’) provided for in Articles 306 to 310 of the VAT Directive and Article 119 of the Law on VAT. Finding it unclear as to when VAT becomes chargeable for the payments on account received by travel agents, Skarpa asked the Minister for Finance to issue an individual interpretation on this point.

12Skarpa’s view was that VAT should become chargeable for its services only when Skarpa can determine the final margin. By contrast, the Minister for Finance took the position that VAT becomes chargeable when the payment on account occurs, provided that the payment is made for a specific, clearly defined service. To determine the margin/taxable amount at that time, Skarpa should take into account its projected costs and thereafter make relevant adjustments when necessary.

13Skarpa challenged the Minister for Finance’s individual interpretation before the Wojewódzki Sąd Administracyjny w Krakowie (Regional Administrative Court of Cracow, Poland). Finding that interpretation to be incorrect and annulling it, that court held that VAT becomes chargeable only when the final margin is known: any other solution would result in an unacceptable change to the statutory rules on the taxable amount, because it would not allow the ‘actual margin’ to be taken into account, and would be based on estimates — the use of which should be limited to strictly defined cases. The adjustment of tax returns should be carried out as an exception and not as the rule.

14The Minister for Finance appealed against that judgment before the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), the referring court. That court is uncertain whether the special rule on the taxable amount for travel agents’ services affects the determination of when the VAT for those services becomes chargeable. Although the customer buys a specific, identifiable service, the costs that will be incurred by the travel agent will only be known later. For that reason, the referring court considers that the general rule under Article 65 of the VAT Directive does not apply. That court does however also admit that such a solution is not provided for in the VAT Directive and could only be inferred from its overall framework.

15Should this Court decide that the VAT becomes chargeable when the payment on account is received, the referring court additionally asks whether the VAT should be calculated on the amount received (if the general rule in Article 65 of the VAT Directive is applied), or whether account should be taken of the specific method for the determination of the taxable amount under Article 308 of the VAT Directive. In this respect, the referring court considers that the taxable amount should be the margin (and not the amount received on account) and that the margin should be calculated based on the costs incurred until receipt of the payment on account. The referring court is unconvinced by the position of the Minister for Finance concerning the taking into account of projected costs. Such a position, albeit justified and dictated by practical considerations, is not supported by the wording of Article 65 and Article 308 of the VAT Directive. On the other hand, taxing the travel agent on the amount received would result in taxing an amount that would be significantly higher than the taxable amount to be finally established.

16In those circumstances, the referring court decided to stay the proceedings and refer the following questions to this Court:

Must [Directive 2006/112] be interpreted as meaning that tax becomes chargeable on payments on account received by a taxable person supplying tourist services, which are taxed under the special scheme for travel agents provided for in Articles 306 to 310 of [Directive 2006/112], at the time defined in Article 65 of [Directive 2006/112]?

If the answer to the first question is in the affirmative, must Article 65 of [Directive 2006/112] be interpreted as meaning that, for taxation purposes, a payment on account received by a taxable person supplying tourist services, taxed under the special scheme for travel agents provided for in Articles 306 to 310 of [Directive 2006/112], is reduced by the cost referred to in Article 308 of [Directive 2006/112] actually incurred by the taxable person up to the time when he receives the payment on account?’

17Written observations were submitted by Skarpa, the Polish Government and by the European Commission. Skarpa, the Szef Krajowej Administracji Skarbowej (Head of the National Revenue Administration, Poland), the German and the Polish Governments, as well as the Commission made oral argument at a hearing that took place on 7 June 2018.

IV. Assessment

18This Opinion is structured as follows. In Part A, I will suggest, in response to the referring court’s first question, that the special rule contained in Article 308 of the VAT Directive relating to the taxable amount does not exclude the simultaneous application of the general rule contained in Article 65 of the VAT Directive concerning the moment at which tax becomes chargeable if payment on account is made. In Part B, in response to the second question, I will propose that VAT is to be calculated on the margin — established as the difference between the sum received as payment on account and the corresponding percentage of the overall projected cost for a given transaction.

A. First question: applicability of the general rule in Article 65 of the VAT Directive to services of travel agents

19By its first question, the referring court wishes to know whether the general rule contained in Article 65 of the VAT Directive, that VAT is chargeable on receipt of the payment on account, applies to payments on account made for the services of a travel agent.

20Skarpa explained at the hearing that usually, its customers first pay 30% of the reserved service, with the remainder being paid prior to departure. The costs are incurred approximately one month prior to the provision of the service but the exact amount of those costs is only known later. According to Skarpa, this is mainly due to the fact that: (i) the price is based on the expected number of travellers, the actual number of which often differs; (ii) fluctuating exchange rates; and, (iii) unexpected costs.

21How, in those circumstances, can VAT become chargeable when it is not clear what amount should be used as the basis for its calculation?

22According to Skarpa, it is simply impossible to apply the temporal rule contained in Article 65 of the VAT Directive and charge VAT when the payment on account is received. Skarpa argues that VAT does not become chargeable until the margin is determined, the determination of the margin being an essential part of the special scheme for travel agents. The rule contained in Article 308 of the VAT Directive thus modifies not only the question of what constitutes the taxable base (margin instead of amount received), but also postpones the moment when VAT becomes chargeable. In other words, the way in which the VAT is charged in this context must be adapted to the specificity of the travel services.

23The Head of the National Revenue Administration, the German and Polish Governments as well as the Commission hold the view that Articles 65 and 308 of the VAT Directive can (and must) apply simultaneously. Both rules concern different aspects of VAT collection and the application of the general rule does not hamper application of the special rules. The costs are incurred at different moments prior to, in the course of, or even after, the relevant provision of the service. In their view, postponing the chargeability of VAT in the way Skarpa suggests would go beyond the objective sought by the special scheme for travel agents, and would lead to an unjustified advantage.

24I share, in principle, the latter position. In my view, the application of the general rule in Article 65 of the VAT Directive (1) does not exclude application of the special rule contained in Article 308 (2), simply because in the context of the present case those two provisions are concerned with different issues. The first concerns when VAT is chargeable, while the other defines what constitutes the taxable amount. Those two provisions are thus not mutually exclusive (3).

1. General rule: when is VAT chargeable?

25The VAT chargeability rules for supplies of goods and services are provided for in Articles 63 to 66 of the VAT Directive. Under Article 63, tax becomes chargeable when goods or services are supplied. ⁵ If payments on account are made, VAT becomes chargeable, under Article 65, ‘on receipt of the payment and on the amount received’.

26The legislative history of Article 65 shows that it was considered essential for the harmonisation of VAT to define the chargeable event at EU level. ⁶ The rationale of the rule concerning chargeability of payments on account was described as follows: ‘when payments on account are received prior to the chargeable event, receipt of these amounts gives rise to a charge to tax, since the parties to the transaction in this way demonstrate their intention that all the financial consequences of the chargeable event should arise in advance’. ⁷

27Article 65 of the VAT Directive is part of Title VI thereof entitled ‘Chargeable event and chargeability of VAT’. It is Title VII, however, that concerns the taxable amount. Thus, the system and context of Article 65 also clearly confirm that that provision focuses primarily on the temporal aspect of VAT collection, and only secondarily and in a (logically) limited way on what the taxable amount (the account paid at the given moment) shall be.

2. Special rule as to what constitutes the taxable amount for the travel agents’ services

28All the parties and interested persons, with the exception of Skarpa, argued that the special scheme for travel agents is not an independent and exhaustive tax scheme that regulates all the aspects of the determination of VAT for travel agents’ services. It is rather a set of rules allowing limited derogations — those necessary to achieve the specific objective pursued by that special VAT scheme, without however derogating from any other elements of the general VAT scheme. ⁸

29I agree with that position.

30The objective of the special scheme for travel agents is twofold. First, this Court has repeatedly explained that the special scheme for travel agents seeks to avoid practical difficulties that would result from ‘the application of the normal rules on place of taxation, taxable amount and deduction of input tax … by reason of the multiplicity of [travel agents’] services and the places in which they are provided’. ⁹

31Secondly, that scheme also aims at keeping collection of VAT for these services in the Member States where the services are carried out, while collecting the tax corresponding to the services provided by the travel agent in the Member State of its establishment. ¹⁰

32As a result, under the special scheme for travel agents, travel agents are not entitled to deduct input VAT charged on the services provided by their suppliers in different Member States. They effectively charge it to their clients as a cost component, ¹¹ together with their own output VAT to be charged on their margin and paid in the Member State in which they are established. ¹² In other words, the price of a travel package includes the price of services provided by the suppliers including the VAT charged by the suppliers, the margin of the travel agent (which at that stage is not yet final) and the VAT to be paid by the travel agents on that margin.

33The above-described elements thus show that Articles 306 to 308 of the VAT Directive contain a twofold derogation: from the definition of the taxable amount (what) as well as the place of taxation (where). However, those provisions are silent as to the chargeable event and chargeability of tax.

3. Applying Article 65 and Articles 306 to 308 of the VAT Directive simultaneously

34As is already apparent from the two previous sections, once one focuses on the exact nature of both provisions in question, the argument of ‘incompatibility’ between the general rule in Article 65 of the VAT Directive on one hand, and the specific rule in Articles 306 to 308 of the same directive on the other, becomes rather tenuous. In other words, the special rule contained in Articles 306 to 308 of the VAT Directive is concerned with the ‘what’ and ‘where’. The first part of Article 65, and indeed the overall logic and purpose of Title VI, are concerned with ‘when’.

35It ought to be further noted that, on the one hand, the general rule in Article 65 of the VAT Directive applies independently of the sector concerned. It specifies when VAT becomes chargeable. It provides that that moment occurs when the payment on account is made. On the other hand, the rule contained in Article 308 of the VAT Directive applies only to travel agents and defines what constitutes the taxable amount for the services provided by them. That taxable amount is the margin, defined as the ‘difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller’.

36There are two counter-arguments to that understanding of the relationship between those two provisions: textual and purposive.

37On the textual level, it is stated at the end of Article 65 that VAT shall become chargeable ‘on the amount received’. ¹³ It could thus be argued that Article 65 also provides for the taxable basis that must always be, for payments on account, the amount received.

38In view of the general points made in the previous sections, but also as a matter of simple logic, I find that reading problematic. What should be taxed, within any payment received, is the ‘taxable amount’ or rather the taxable part of the payment received. That does not naturally mean that any and all payments received will be automatically taxed. Yet again, for the purpose of determining the (taxable) amount received in the case of services provided by the travel agents, reference must be made to the special provision of Article 308 that indeed defines ‘the taxable amount’ for this purpose. ¹⁴

39On the purposive level, it ought to be recalled that Articles 306 to 308, or rather the entire Chapter 3, falls under Title XII of the VAT Directive entitled ‘Special schemes’ (for the respective sector or activity). It could thus be suggested that the EU legislature wished to establish a separate ‘scheme’, potentially derogating not only from those elements expressly provided for within the relevant chapter dedicated to each special scheme, but also from further, general provisions that could potentially pose problems in the operation of that special scheme.

40I do understand the broader logic of that argument. It would appear nonetheless that such an approach is at odds with the established case-law, which insists on the strict and narrow interpretation of any departure from the general VAT regime, both generally, as well as specifically with regard to the special scheme for travel agencies.

41In general, it is a well-established approach of this Court that any derogations provided for in the VAT Directive should be interpreted narrowly. That means that their scope should be limited strictly to the text and objective for which they have been designed, even though a broader derogation could be conceivable. Most recently, that principle was yet again underlined by the Court in the Avon Cosmetics judgment, ¹⁵ clearly rejecting the idea that a derogation provided with regard to the calculation of the taxable amount in a direct selling model could be interpreted as allowing also for deduction of costs of products bought for demonstration purposes at the level of input tax. Allowing for such a further derogation (certainly defendable in general) would effectively mean that a derogation provided with regard to one specific element would then be allowed to generate further ‘ripple effects’ throughout the entire VAT system, resulting in the generation of a number of parallel ‘à la carte’ regimes, extending clearly beyond the derogation’s scope of application. ¹⁶

42As regards the specific scheme for travel agencies, the Court has repeatedly recalled that ‘as an exception to the normal rules of the [VAT] Directive [the special scheme for travel agents] must be applied only to the extent necessary to achieve its objective’. ¹⁷ It has also acknowledged the simultaneous application of that scheme with relevant general provisions of the VAT regime, the general rules being applied to the aspects of a transaction falling outside the derogation for travel agents. ¹⁸

43I fail to see how the objectives pursued by the special scheme for travel agents ¹⁹ could be affected by the application of the temporal rule of Article 65 of the VAT Directive. With VAT becoming chargeable upon reception of payments on account, the VAT would still be charged on travel services in the Member States in which they are carried out. That VAT would not be deducted in those States but carried forward to the customer by the travel agent and the latter would charge its output VAT on its margin and pay it in the Member State of its establishment.

44That general finding does not appear to be altered by the arguments raised by Skarpa in the context of the present case.

45First, Skarpa argues that the margin is an essential element of the margin scheme. Thus, when the exact margin is unknown, VAT does not become chargeable. This argument seems to be inspired by case-law of the Court showing that application of Article 65 of the VAT Directive requires that all the elements of the transaction should be determined. ²⁰

46It is true that the case-law requires a degree of certainty so that VAT can be charged on supplies of goods or services. It follows from the judgment in BUPA Hospitals that that certainty is not in principle given when ‘lump sums are paid for goods referred to in general terms in a list which may be altered at any time by agreement between the buyer and the seller and from which the buyer may possibly select articles, on the basis of an agreement which he may unilaterally resile from at any time, thereupon recovering the unused balance of the prepayments’. ²¹

47I have difficulty applying that case-law to the present case. In contrast to the factual situations in those cases, the nature and the content of the service provided by travel agents tend to be very well-known and defined, often with a high degree of precision, including, as vividly described at the hearing, even going to the extent of ensuring that the room being booked faces in a certain direction. In those circumstances, it is difficult to conceive that the margin constitutes an essential element of the ‘chargeable event’. It strikes me as a rather technical aspect of the tax collection which is usually unknown to the customer, thus falling outside the set of elements of a transaction that have to be defined in advance.

48Skarpa further argues that the taxation of payments on account, when the margin is still unknown, will cause serious and disproportionate difficulties in practice: VAT returns would have to be constantly adjusted. In Skarpa’s opinion, this would be contrary to the objectives of the margin scheme. What also emerged at the hearing was that there are in fact two propositions hidden in that statement: the issue of knowledge (known or unknown margin) and the practical difficulties of readjustment.

49Second, as far as the issue of the unknown margin is concerned, it was confirmed by Skarpa at the hearing that in general, the price charged to the clients by a travel agent appears to be a compound of different amounts. The VAT to be subsequently calculated and paid by the travel agent is actually already included in that ‘catalogue price’. The final margin appears thus to be calculated ‘by exclusion’ in the sense that once the actual costs are deducted from the payment received, the remainder is divided between margin and the VAT. In this way, the travel agent does not send any corrected invoice to the client.

50To provide an example: assuming that the price of the travel is EUR 1000 and the costs are EUR 800, the difference of EUR 200 has to be divided between the margin and VAT. Imagine that the VAT rate is 21%. The sum of EUR 200 thus represents 121%, which will be divided into VAT corresponding to EUR 34.71, and the margin corresponding to EUR 165.29.

51If that is indeed how the industry operates, which I understood to be confirmed by Skarpa at the hearing, together with the fact that the catalogue price is already inclusive of VAT and that the travel agencies would not charge any VAT separately later, then the only logical inference I can make from those statements is the following: a reasonably well-run travel agency must indeed prepare a rather detailed estimate of its projected costs and estimated margin, in order to be able to publish any such price in a catalogue.

52Thus, although the exact margin may indeed not be known either at the moment when the payment on account is made, or at the moment that the service is actually provided, or even considerably later (until and unless all the payments to a certain supplier and/or for a certain season are settled), the fact remains that any travel agent not wishing to suffer losses is likely to have a rather detailed estimate of projected costs before it sets up and advertises certain travel.

53Third, concerning the practical difficulties referred to by Skarpa, in particular the need for additional readjustments, I would simply suggest that such an argument can hardly, in and of itself, warrant the effective exclusion of the statutory VAT rules. ²²

54In addition, contrary to what Skarpa argues, any such practical difficulties are not the ones that the margin scheme was designed to avoid. As explained above, ²³ the special scheme for travel agents was designed to do away with the need for travel agents to claim VAT deductions all over the European Union. But it was hardly meant to liberate them of all the administrative responsibilities that any taxable person faces in similar circumstances. ²⁴

55That conclusion seems to be all the more warranted given that the opposite would confer upon the travel agent a double financial advantage: it would be entitled to pay the VAT even after the provision of services, whenever the margin becomes known, while charging its customers in advance. I fail to see how such an interpretation would provide a reasonable balance between all the interests involved.

56Lastly, the problem of the provisional nature of the margin when the payment on account is received does not seem to be limited to the payment on account. I understand from the description given at the hearing that as a matter of fact, the margin may still be unknown even after the travel services are provided, when adjustments are made by the travel agent’s suppliers.

57This fact only underlines the overall problem of the Skarpa’s argument on this point. If taken to its full logical conclusion, then Skarpa is effectively asking not just for the derogation from Article 65 of the VAT Directive, as the same argument could be stretched to exclude the applicability of Article 63 too. ²⁵ Moreover, since the exact margin may not be known when services are supplied, the point at which VAT will be chargeable would, in effect, become completely dependent on the self-declaration of the travel agent as to when it considers that it knows the exact amount of the margin. This is likely to occur not when the service in question is provided, but weeks or months later, or perhaps even at the end of each season, when there are likely to be full and complete breakdowns of all the actual costs provided for each individual component service. Needless to say, during all those periods, the respective resources would be unavailable to the State. ²⁶

58In the light of the above, my interim conclusion is that the VAT Directive shall be interpreted as meaning that tax becomes chargeable on payments on account received by a taxable person supplying travel services, which are taxed under the special scheme for travel agents provided for in Articles 306 to 310 of the VAT Directive, at the time defined in Article 65 of the VAT Directive, that is when the respective payment on account is received.

B. Second question: how to determine the VAT when the taxable amount is unknown

59By its second question, the referring court wishes to ascertain how, if tax is indeed chargeable upon receipt of a payment on account, that tax is to be determined when the exact margin, that is the taxable amount, is not yet known.

60The Head of the National Revenue Administration, the Polish and German Governments, as well as the Commission agree that VAT should not be charged on the amount received but on the margin. ²⁷ However, suggestions as to how that margin should be established at the moment of receipt of the payment on account differ.

61The Head of the National Revenue Administration maintains that the margin should be determined on receipt of the payment on account, based on the projected costs. The necessary adjustments are to be made subsequently — in the tax return for the respective accounting period during which the service was provided. Similarly, the Polish Government argues that to establish the margin when the payment of account has been received, Skarpa should embrace the ‘functional approach’ and use as a basis the projected costs.

62At the hearing, the German Government presented a (in part) similar position. It argued that to determine the margin, the costs to be taken into account should be the incurred costs and the projected (foreseeable) costs. According to that government the phrase ‘actual cost to the travel agent’ in Article 308 of the VAT Directive should be understood in that way.

63The Commission considers that the taking into account of projected costs for the purpose of establishing the margin upon the receipt of the payments on account would go against the wording of Article 308 of the VAT Directive. That provision refers to ‘actual cost’ to the travel agent. ²⁸ Thus, only the actual costs incurred until that payment can be relied on to determine the margin when payments on account are received. The Commission’s position also corresponds to the suggestion made by the referring court.

64As further discussed at the hearing, there are essentially five different options as to how, in theory, the calculation of the margin and the taking into account of costs in those circumstances can be approached.

Article 65 of the VAT Directive does not apply. No VAT is to be charged when the payment on account is received and the margin is to be relied on for the calculation of the VAT when it is definitely known (Skarpa’s position).

VAT is to be charged on the amount of the payment on account received (instead of on the margin). That would result from the literal application of Article 65 of the VAT Directive.

The VAT should be charged on the margin, calculated by subtracting a proportion of the projected costs for a given transaction from the amount received on account. That proportion would correspond to the proportion that the amount received represents out of the total price for the service (the position of the Head of the National Revenue Administration and of the Polish Government).

The VAT should be charged on the margin, but that margin should be established on receipt of the payment on account, by subtracting the actual costs in the sense of the costs actually incurred by the travel agent up to the moment of receipt of the payment on account (the position of the Commission and also suggested by the referring court).

The VAT would be charged on the margin, also established at the time of receipt of the payment on account, but relying on the costs incurred by the travel agent up to the time of the receipt of the payment on account and the projected costs, provided that all projected costs have not yet been incurred (the position of the German Government).

65The mere listing of all those (at least theoretically conceivable) options clearly demonstrates that the answer to be given is far from clear. However, some options are more problematic than others.

66For the reasons already discussed in detail in response to the first question, ²⁹ the first position defended by Skarpa simply cannot be accepted without further distorting the entire system of VAT collection. In addition, if such an approach were to be embraced, why stop at Articles 65 and 63. There might potentially also be other (general) provisions of the VAT Directive that could ‘ideally’ be further adapted in order to provide for the (objectively, no doubt entirely justified) specific needs of a specific industry. But that is exactly the slippery slope that this Court has been trying to avoid.

67For the reasons also already alluded to above, ³⁰ the second option cannot be accepted either. It is true that Article 65 of the VAT Directive states that ‘VAT shall become chargeable on receipt of the payment and on the amount received’. ³¹ However, embracing such a position would also by definition always lead to a (presumably provisionally) disproportionate result because such an initial taxable amount would by definition be higher than the taxable amount to be determined subsequently. Also for that reason, I consider that the reference made in Article 65 to ‘the amount received’, is to be understood as a reminder of the general rule according to which a tax is to be charged on ‘everything which constitutes consideration obtained or to be obtained by the supplier …’. That follows from Article 73 of the VAT Directive. ³² More specifically in the present context, I am of the view that the term ‘on the amount received’ appearing in Article 65 of the VAT Directive should be understood as referring to the taxable amount received. That taxable amount is, under the specific rule in Article 308 of the VAT Directive, the margin. That special rule shall thus be inserted into the logic of Article 65 of the VAT Directive where the latter refers to the ‘amount received’.

68I readily acknowledge that the fourth and fifth options would follow more closely from the wording of Article 308 of the VAT Directive. However, I am afraid that they also simply cross the line from accounting and VAT declarations being a rather complex exercise, to making it ‘mission impossible’. Indeed, under those options the individual breakdown of all the actual incurred costs would have to be made repetitively and differently for each payment on account received.

69That appears, indeed, for a number of reasons, to be simply impossible. First, certain services are purchased in large numbers (accommodation and transport), whereas the individual services within them are sold separately. If that is indeed the case, then proportion of the overall costs in respect of each transaction (each service) is likely to be unknown when the payment on account is received, especially since the amount of individual services sold is likely to change considerably over time. Second, it is unclear to me how such actual costs for services ordered in large amounts would be paired up with the individual services provided. Third, all that becomes even more complex in cases in which the payments on account were not just 100% of the price, but indeed fractions of it, like 10%, 30%, or 50%.

70Furthermore, in all these cases, before the final situation is known, the subtraction of all the actual costs incurred at the moment at which either only part of the payments is made (only for some places on a larger package trip) and/or even just a percentage of that price (30% or 50%), will likely lead to a negative balance. In other words, at a specific moment of time, the actual cost, in the sense of cost that has been effectively incurred, may amount to 100% of all costs, while the payment on account may only correspond to 10% of the price of the service. It is not clear to me how precisely that should be adjusted later and whether such ‘temporary losses’ should for example be declared as such.

71Thus, for all practical purposes, it would appear to me that, at the end of the day, in view of such complexity, realistically, what could be carried out would be, at best, another (informed) estimate as to where the level of actual costs could lie. The only difference would be that the travel agency would be asked to carry out such an assessment over and over again, with Sisyphean diligence, every time it receives any payment on account.

72At the same time, as already explained above and confirmed at the hearing, it seems that an informed travel agent would have a fairly good idea of the costs to be incurred and the margin to be obtained in respect of a specific transaction.

73All these considerations lead me to the conclusion that it is indeed the third option, suggested by the Head of the National Revenue Administration and by the Polish Government, that appears to be the most reasonable and the least burdensome. That position seems to me as striking a reasonable balance between the respective interests of the national tax authority and the taxable person, while remaining within the realm of the possible. That approach gives neither of those parties an excessive advantage over the other. This is because neither of them seems to have in their possession, at any relevant time, ‘too much money’ in comparison to what that party will finally be entitled to.

74The example given at the hearing by the Head of the National Revenue Administration captures that logic well. If the price of the service is, for example, 1000 Polish zloty (PLN), with the estimated margin to be made up of 20% of that price (PLN 200), and the client makes an advance payment of PLN 500, the margin to be taken into account at the time of receipt of the payment on account should be PLN 100. It is on that amount of PLN 100 that the VAT should be calculated, and it should be charged at that stage, with subsequent and final adjustments to be carried out once the final margin is known, if necessary.

75In addition, this ensures a reasonable balance in terms of neither excessively overpaying nor withholding the tax due, and it also allows for the accounting process to be manageable, while complying with the Court’s previous holding (in the judgments in Commission v Spain ³³ and Commission v Germany ³⁴) that the margin must be determined in relation to each transaction and not ‘globally’ per given period. But the entire exercise with regard to the costs calculation for each individual transaction (in the sense of each service provided by the travel agent) would need to be carried out only twice. This would be first, when deciding the initial estimates and calculating the projected costs before pricing and advertising the service, and second, at the very end, when all the costs and the exact margin are known.

76In the light of the foregoing, I therefore conclude that the VAT is to be calculated on the margin, established as the difference between the sum received as payment on account and the corresponding percentage of the overall projected costs for the given transaction.

77A concluding remark is called for. I readily acknowledge that the solution that I have just suggested is not ideal. But, based on the outlined process of elimination of the extremes, it appears to be the one that is the least onerous and cumbersome for all the parties concerned, while remaining within the options that can still reasonably be said to pertain to the ambit of judicial interpretation of the extant rules.

78The determination of VAT-related obligations of travel agents encounters difficulties that stem from the temporal discrepancies between, on one hand, receipt of the amount of the price and, on the other hand, the engagement of costs. The calculation of the margin in those circumstances is a rather complex exercise, as the Member States’ experience shows. Those difficulties have been addressed in some Member States by establishing a flat-rate margin for a given period. ³⁵ Besides, a proposal aiming at the introduction of an overall rate for the calculation of the margin of travel agents was tabled in 2002. ³⁶ It was, however, abandoned in 2014. Furthermore, in view of the Court’s judgments in Commission v Spain ³⁷ and in Commission v Germany, ³⁸ that approach appears to be problematic.

79In such an (already) complex environment, I agree with the general proposition made by the German Government that it is advisable to strive for a solution that poses less rather than more additional difficulties. It is also not without a certain dose of irony that, as almost all the parties and interested persons suggested at the hearing, the special schemes were put in place in order to simplify the operation of the system, while arriving at strikingly different opinions as to what such simplification should mean in the specific context of the special scheme for travel agents. Also in view of such notable diversity in simplification, I assume it would be advisable to leave further simplification steps in this regard to the EU legislature and/or, within the bounds set by the EU law, to the national legislatures.

V. Conclusion

80In the light of the above, I suggest that the Court respond to the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) as follows:

Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax shall be interpreted as meaning that tax becomes chargeable on payments on account received by a taxable person supplying travel services, which are taxed under the special scheme for travel agents provided for in Articles 306 to 310 of Directive 2006/112, at the time defined in Article 65 of the same directive, that is when the respective payment on account is received;

At that moment, VAT is to be calculated on the margin, established as the difference between the sum received as payment on account and the corresponding percentage of the overall projected costs for the given transaction.

¹ Original language: English.

² Council Directive of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

³ That appears to follow from Article 3(1) of the Decree of the Minister for Finance relating to the implementation of certain provisions of the Law on VAT of 4 April 2011 (Dz. U. 2013, position 247).

⁴ At the hearing, the Polish Government explained that that change was in response to the judgment of 16 May 2013, TNT Express Worldwide (Poland) (C‑169/12, EU:C:2013:314).

⁵ The Court recalled that ‘Article 63 of [the VAT] directive reflects that fundamental principle, providing that the chargeable event is to occur and VAT is to become chargeable on the date on which the goods or the services are supplied’. Judgment of 16 May 2013, TNT Express Worldwide (Poland) (C‑169/12, EU:C:2013:314, paragraph 22).

⁶ See the Proposal for a Sixth Council Directive on the harmonisation of legislation of Member States concerning turnover taxes — Common system of value added tax: uniform basis of assessment (COM(73) 950 of 20 June 1973). See also the explanatory memorandum to the proposal for the Sixth Directive, Bulletin of the European Communities, supplement 11/73, p. 12.

⁷ The explanatory memorandum to the proposal for the Sixth Directive, Bulletin of the European Communities, supplement 11/73, p. 13.

⁸ Judgment of 12 November 1992, Van Ginkel (C‑163/91, EU:C:1992:435, paragraph 15), or of 22 October 1998, Madgett and Baldwin (C‑308/96 and C‑94/97, EU:C:1998:496, paragraph 5). See also paragraph 34 of the same judgment and judgment of 25 October 2012, Kozak (C‑557/11, EU:C:2012:672, paragraph 20).

⁹ See judgments of 19 June 2003, First Choice Holidays (C‑149/01, EU:C:2003:358, paragraphs 24 and 22 and the case-law cited); of 9 December 2010, Minerva Kulturreisen (C‑31/10, EU:C:2010:762, paragraphs 17 and 18 and the case-law cited); and of 25 October 2012, Kozak (C‑557/11, EU:C:2012:672, paragraph 19).

¹⁰ See, for an illustration of this, the Council’s interinstitutional file 2002/0041 (CNS), on ‘VAT — Special scheme for travel agents’ [17567/09]: ‘2. The first objective of the scheme was to simplify the application of the VAT rules to these transactions, saving the operators from having to register in the various Member States where the services were provided. 3. A second objective was to ensure that VAT due on goods and services purchased by an agent is collected by the state in which those transactions are carried out, while the tax corresponding to the services supplied by the travel agent is collected in the state in which the agent is established.’

¹¹ And this input VAT is recovered implicitly — see Opinion of Advocate General Tizzano in First Choice Holidays (C‑149/01, EU:C:2002:485, point 25).

¹² More specifically, the second paragraph of Article 307 of the VAT Directive states that ‘the single service [of the travel agent] shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services’.

¹³

¹⁴ See further, point 67 of this Opinion.

¹⁵ Judgment of 14 December 2017 (C‑305/16, EU:C:2017:970, paragraphs 36 to 40).

¹⁶ See also my Opinion in Avon Cosmetics (C‑305/16, EU:C:2017:651, especially points 39 to 41 and 50, 58 to 60 and the case-law cited).

¹⁷ See, for instance, judgments of 22 October 1998, Madgett and Baldwin (C‑308/96 and C‑94/97, EU:C:1998:496, paragraphs 5 and 34); of 19 June 2003, First Choice Holidays (C‑149/01, EU:C:2003:358, paragraph 22 and the case-law cited); of 9 December 2010, Minerva Kulturreisen (C‑31/10, EU:C:2010:762, paragraph 16); and of 25 October 2012, Kozak (C‑557/11, EU:C:2012:672, paragraph 20 and the case-law cited).

¹⁸ Concerning the determination of taxable amount concerning in-house and bought-in services, see judgment of 22 October 1998, Madgett and Baldwin (C‑308/96 and C‑94/97, EU:C:1998:496, paragraph 39 et seq.).

¹⁹ Identified and discussed above in points 30 to 33.

²⁰ Judgments of 21 February 2006, BUPA Hospitals and Goldsborough Developments (C‑419/02, EU:C:2006:122, paragraph 48); of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780, paragraph 31); of 3 May 2012, Lebara (C‑520/10, EU:C:2012:264, paragraph 26); of 19 December 2012, Orfey Balgaria (C‑549/11, EU:C:2012:832, paragraph 28); and of 7 March 2013, Efir (C‑19/12, not published, EU:C:2013:148, paragraph 32).

²¹ Judgment of 21 February 2006, BUPA Hospitals and Goldsborough Developments (C‑419/02, EU:C:2006:122, paragraph 51).

²² See, iteratively, to show the Court’s lack of acceptance of ‘practical or technical difficulties’ as a sufficient reason for departure from EU rules, judgment of 27 October 1992, Commission v Germany (C‑74/91, EU:C:1992:409, paragraph 12); or judgment of 23 May 1996, Commission v Greece (C‑331/94, EU:C:1996:211, paragraph 12).

²³ In detail above, points 30 to 33.

²⁴ See, in this sense, Opinion of Advocate General Léger in MyTravel (C‑291/03, EU:C:2005:283, point 79): ‘Moreover, although the purpose of Article 26 of the Sixth Directive is to adapt the rules applicable in respect of VAT to the specific nature of the work of a travel agent and thus reduce the practical difficulties which might hamper such work, the scheme established by that Article, unlike that set up for small undertakings and agricultural producers, is not intended to simplify the accounting requirements entailed by the general VAT scheme.’ Also, see judgment of 19 June 2003, First Choice Holidays (C‑149/01, EU:C:2003:358, paragraph 25).

²⁵ In the absence of any national rules adopted based on Article 66 (a) to (c) of the VAT Directive.

²⁶ The Court held that ‘…in the field of VAT, taxable persons act as tax collectors for the State’ and has regarded as justified provisions of the Sixth Directive designed to prevent ‘large sums of public money accumulating in their hands during a tax period’. Judgment of 20 October 1993, Balocchi (C‑10/92, EU:C:1993:846, paragraph 25).

²⁷ This is also the (alternative) position of Skarpa, with the clear caveat flowing from its proposed answer to the first question that Article 65 of the VAT Directive cannot apply and that the VAT becomes chargeable only when the margin is known.

²⁸ In some of the other language versions captured as coût effectif supporté par l’agence de voyages (French); tatsächliche(n) Kosten die dem Reisebüro entstehen (German); faktyczne koszty poniesione przez biuro podróży (Polish); skutečné náklady cestovní kanceláře (Czech); coste efectivo soportado por la agencia de viaje (Spanish).

²⁹ See above points 39 to 57 of this Opinion.

³⁰ Above, points 37 to 38.

³¹ Emphasis added.

³² ‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply’. According to settled case-law, the definitive taxable amount under the general rules is the consideration actually received, see, for example (as regards supplies of goods), judgment of 29 May 2001, Freemans (C‑86/99, EU:C:2001:291, paragraph 27 and the case-law cited).

³³ See judgment of 26 September 2013 (C‑189/11, EU:C:2013:587, paragraphs 101 to 104).

³⁴ Judgment of 8 February 2018 (C‑380/16, not published, EU:C:2018:76, paragraphs 87 to 92).

³⁵ The various national solutions were described, as Skarpa pertinently pointed out at the hearing, in the report drafted for the Commission, entitled Study on the review of the VAT Special Scheme for travel agents and options for reform, Final Report TAXUD/2016/AO-05, December 2017 (accessible online at the website of the European Commission). That report mentions that around 14 Member States provide for such an alternative.

³⁶ Proposal for a Council Directive of 8 February 2002 amending Directive 77/388/EEC as regards the special scheme for travel agencies, COM(2002) 64 final (OJ 2002 C 126E, p. 390). Similarly, the VAT Committee considered that it was acceptable to use an overall calculation: ‘The Committee also held that the principle applied to travel agents of taxing the margin does not preclude determination of the margin for all transactions on the basis of the same formula during a specific period.’ (Guidelines resulting from the 17th meeting of 4 to 5 July 1984, XV/243/84). See Guidelines resulting from meetings of the VAT Committee (Up until 2 July 2018), available at https://ec.europa.eu/taxation_customs/business/vat/vat-committee_en.

³⁷ See judgment of 26 September 2013 (C‑189/11, EU:C:2013:587, paragraphs 101 to 104).

³⁸ Judgment of 8 February 2018 (C‑380/16, not published, EU:C:2018:76, paragraphs 87 to 92).