The European Tour Operators Association (ETOA) is hoping intervention from the EU will be enough to find alternatives to an imminent new tax law that is slated to go into effect in Germany in early 2023.
The ETOA says that the EU is currently considering how best to handle Germany’s new value-added tax (VAT) on travel services as well as tourism in the online and offline marketplace, while also developing options with input from the industry and experts.
The collaboration comes after the ETOA reported this month that demand for travel to Germany has declined, with some markets “avoiding German product altogether or not promoting it” due to anticipated challenges the new German VAT will present once it goes into effect on Jan. 1.
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Under the tax, which will levy taxes on travel services sold in non-EU markets, the price of vacations in Germany is expected to increase by at least 10%, according to the ETOA.
The VAT has been a point of contention between international tour operators and Germany as the tax will likely raise prices for consumers as operators say they will take on more costs, and administrative work, to pay the taxes.
The tax rule will require companies based outside of the EU to register with Germany to buy and sell German tourism products and to file a tax return.
Currently, non-EU companies selling travel to Germany are exempt from paying VAT under the Tour Operators Margin Scheme, or TOMS. Rather than register and account for VAT in the destination where services were carried out, under TOMS, non-EU companies paid taxes on the margins where the sale was made and the business was established.
The new rule would compel businesses to pay taxes twice: once in the country where they are based when they’ve made a sale on vacation products to Germany and again on the travel eventually carried out in Germany.
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