I am advised by the Revenue Commissioners that provisions covering the Travel Agents Margin Scheme are contained in Section 88 of the VAT Consolidation Act 2010. This scheme, which is provided for in Articles 306 to 310 of the EU VAT Directive, with which Irish VAT law must comply, was introduced with effect from 1 January 2010. Detailed discussions with the travel industry were carried out prior to the introduction of the scheme which is a standard EU-wide Scheme in operation in most Member States of the EU. The scheme deals with the activities carried on by travel agents who act in the capacity of a principal when supplying certain travel services such as transport, accommodation, etc, which they have bought in from third parties for onward supply to travellers. Travel agents covered by the scheme are liable to VAT on their margin on the services provided rather than the full consideration they receive in respect of the supply of these services.
The nature of the scheme means that the travel agent only has an obligation to account for VAT on the margin in the country where he/she is established. The travel agent has no further VAT obligations in places where the travel services are supplied. The travel agent cannot recover any VAT charged when he/she purchases the travel services but this is because VAT is only accounted for on the margin when the services are supplied on to the traveller. The VAT treatment applied under the margin scheme has the same effect as for ordinary traders who account for VAT on the full consideration charged for a supply of goods or services and recover VAT on the purchase of those goods or services. There is no double taxation. Similarly travel agents like other traders can recover VAT on deductible overheads incurred by them in connection with their taxable supplies.
The scheme has benefits for a travel agent in terms of complying with his/her VAT obligations. In the absence of the scheme a travel agent could have compliance obligations across many Member States of the EU with a resultant increased administrative burden.