Special VAT scheme for travel agencies and tour operators

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• Procedure for a taxable person applying the special scheme

Procedure for a taxable person applying the special scheme

The VAT Act requires a taxable person to apply the special scheme for taxing travel services where it purchases travel services from other taxable persons and sells them to customers in its own name. The special scheme does not apply where the taxable person acts as an intermediary and sells travel services in the name and on behalf of another person.

A taxable person (travel agency or tour operator) cannot tax individual travel services separately.

A travel service may be:

• a combination of travel services, such as accommodation, transport, meals, guide services and admission to cultural or sporting events, purchased from other taxable persons and sold by the travel agency as one package in its own name to the final customer;
• an individual travel service, such as transport or accommodation purchased from another person and subsequently sold to the customer in its own name.

Taxable supply

Under Section 65(1) of the VAT Act, travel services purchased from other taxable persons, the agency’s own services and the agency’s margin are treated as one supply. The supply is subject to tax in the Member State where the travel agency has its registered office or establishment from which it supplied the service.

If the travel agency has its registered office or an establishment in Slovakia from which it supplies the service, the service is taxed in Slovakia.

Input VAT and deduction

A taxable person applying the special scheme may not deduct VAT on travel services purchased from other persons (Section 65(2) of the VAT Act).

If the service is purchased from a VAT payer, the agency cannot deduct the tax and includes the purchased service including tax in its selling-price calculation. If it is purchased from a person who is not a VAT payer, the purchase price is included in the calculation.

Services purchased in another EU Member State are included at their purchase price. If VAT was charged in the supplier’s Member State, the price includes that VAT. A travel agency purchasing services from foreign persons in other Member States has no right to a refund of the tax paid there when it applies the special scheme to the resale.

Services purchased from third countries are included at their purchase price.

A travel agency has no right to deduct VAT on travel services purchased from other persons and does not report those services in its VAT return.

The agency may deduct VAT on goods and services relating to its own operation if the conditions in Sections 49–51 of the VAT Act are met—for example, equipment, rent, telecommunications, energy and other overheads. If it also sells travel-related goods such as maps, timetables, postcards or souvenirs, it may deduct input VAT on their purchase and charge output VAT on resale.

Notice:

If the agency must use the coefficient method under Section 50, travel services purchased from other persons are not included in either the numerator or denominator of the coefficient. Purchased services resold under the special travel-agency scheme do not affect the coefficient.

Section 50(2) sets out which amounts are included in the numerator and denominator. Where the special scheme applies, the coefficient includes the positive difference representing the agency’s margin excluding VAT, calculated under Section 65(3). If the margin is subject to VAT, the amount excluding VAT is included; if the margin is exempt, it is included in both the numerator and denominator as well.

Tax base and tax point

The special tax-base method applies to travel services. From 1 January 2020, the tax base is the positive difference between the total selling price charged to the customer and the total prices of travel services purchased from other persons. If the actual costs are not known when the tax liability arises, the tax base is the difference between the total selling price and the agency’s estimated costs under Section 65(3).

This difference is the agency’s margin and is treated as a VAT-inclusive price. If the difference is zero or negative, the tax base is zero.

The tax liability on a travel service arises on the day the last service is provided. If payment is received before the last service is provided, the tax liability arises for each payment on the day it is received.

Example:

A travel agency offers a 10-day trip to Tatranská Lomnica for €900. The price includes accommodation and meals purchased from a VAT payer for €480 including VAT, and bus transport purchased from a non-payer for €70. The agency cannot deduct VAT on services purchased from the VAT payer.

The tax base, i.e. the agency’s margin, is the selling price less the services purchased from other persons: €900 − (€480 + €70) = €450. This margin is treated as a VAT-inclusive price.

The agency’s margin is:

• subject to VAT where the purchased travel services are provided in the EU (in Slovakia or another Member State);
• VAT-exempt where they are provided outside the EU (third countries);
• partly exempt and partly taxable where they are provided partly inside and partly outside the EU, in proportion to the services provided in each area.

The margin is taxed or exempt depending on where the services purchased from other persons are provided. It does not matter whether the customer is a consumer or business from Slovakia, another Member State or a third country.

Correction of the tax base and tax

If the price of purchased travel services changes after a travel service such as a tour has been sold, the agency does not make an additional correction if the selling price charged to the customer does not change.

The agency may correct the tax base only where the price of the travel service is subsequently reduced—for example because of a complaint—and it can prove that part of the price was refunded to the customer, meaning that the selling price changed.