VAT Issues

Created on 9th of November 2005   Last Modified on the 15th of November 2011

The EU rules on VAT are extremely complex and so the UKTRF, in conjunction with ETRC, has maintained very close contact with the VAT unit of the Commission's TAXUD Directorate, on a wide range of issues, in order to ensure that the interests of travel retail operators are fully represented.

Although land based operators face a number of VAT issues, the rules that apply to mobile operators (ships and aircraft) are particularly complex and onerous. Because they operate in a number of different Member States, they are required to register and account for VAT in every single State that they serve. The UKTRF's main objective therefore has been to work with the Commission in order to simplify the VAT arrangements for mobile operators.

In this context, the UKTRF and ETRC made a major contribution to a detailed study undertaken in 2002/3 by Price Waterhouse Coopers on behalf of the Commission. This study, entitled the 'Simplification and Modernisation of VAT obligations in the EU', fully recognised the problems faced by mobile operators, and recommended a major simplification of the VAT rules. These are likely to take many years to be agreed and implemented by Member States; the PWC report did for example, lead to a Commission proposal for a One-Stop Shop scheme for VAT, but this has not been progressed further.

The UKTRF and ETRC are also closely monitoring a number of other VAT issues. Among these are the new rules for the place of supply of services introduced on 1st January 2010. Some Member States are now applying VAT to restaurant and catering services on board ships and aircraft, but many, including the UK, are continuing to relieve such supplies from VAT. The situation is therefore very complex and may become even more volatile in terms of differentiation between goods and services in this context.

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