On 10 September 2026, the Court of Justice ruled in Case C-565/24 that the special VAT scheme for travel agents can apply to a business that is not really selling travel at all.
The case
Between 1997 and 1999, a German company organised excursions combined with the sale of goods, known in Germany as Kaffeefahrten, or coffee trips. Participants travelled by coach to tourist sites, had a meal and were invited to sales events. The company bought the transport from third parties and sold it in its own name. The fee did not cover the costs. The rest was funded by the sale of goods, which was not mandatory for participants.
The company deducted the VAT on the transport. The German courts held that the fee-paying excursions fell under the travel agents' scheme, so no deduction was possible.
The ruling
The scheme applies. It covers a taxable person who buys tourist services from third parties and sells them in its own name to consumers as excursions, even if the fee does not cover the cost and the remainder is financed from sales of goods.
No refund on a negative margin. The taxable amount is the margin per single service, not an overall figure. If that margin is negative, the taxable person has no right to a refund of input VAT. Under the scheme, VAT on bought-in services for the direct benefit of the traveller is not deductible. A refund would also make the Member State of establishment bear VAT levied in another Member State, and would amount to netting losses against profits. The Court added that the company had freely chosen this model, knowing that the travel services were structurally loss-making.
The case arose under the Sixth VAT Directive.
What to check
- Businesses that use trips, events or incentives to sell something else should test whether they buy in tourist services and resell them in their own name.
- If they do, the input VAT on those services is a cost. Do not build a business case on deducting it.
- Calculate margins per service. Losses on one trip do not offset profits on another.
mr. J. el Khalfioui LL.M.