EC move eases VAT fears

Commission siding with commonsense option 

The European Commission is planning to change a new VAT regulation which industry experts had feared would create an administrative nightmare.

The original changes led travel managements companies to think they might have to register in all 27 EU countries for VAT purposes.

The new EU Value Added Tax Directive Article 47 deal with "the place of supply of services rule".

But Article 47 of the new directive addresses in particular VAT payments on immovable properties which, agents believed, could be interpreted as hotels.

They are due to come into force on January 1, 2010.

But a newly drafted regulation has now altered this interpretation.

David Bennett, travel VAT partner for chartered accountants Saffery Champness, has told the UK and Ireland Institute of Travel and Meetings (ITM) that the new interpretation "is understood to favour the intermediary interpretation of hotel reservation services".

This would end the need for TMCs to register in all EU countries where they booked hotels as the customer, not the agent, would be liable for the tax.

Mr Bennett told the ITM: "It is believed, that the services of intermediaries (except "experts" and "estate agents") connected to immovable property shall be treated as falling in the new general rule (i.e. supplied where the customer is established) when supplied to business customers. 

"This would seem to be good news for all those hoping that a pragmatic solution to this problem could be found and would certainly, if confirmed, remove many of the complexities which could otherwise be expected.

"It will still be necessary however that the member states agree to the draft Regulation before it can become law."

 www.itm.org.uk  www.hmrc.gov.uk   

See ABTN's article on the problem:  www.abtn.co.uk/news/0213353-feature-an-adminsitratrive-nightmare-november-2