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KPMG EU Tour Operators Margin Scheme (TOMS) Study

KPMG EU Tour Operators Margin Scheme (TOMS) Study

The European Commission has published a study undertaken by KPMG regarding the European Tour Operators Margin Scheme (TOMS) VAT rules.


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In 2017 the European Commission appointed KPMG to undertake a study regarding the European Tour Operators Margin Scheme (TOMS) VAT rules, which apply to travel services bought-in and re-supplied as principal. It is expected that this KPMG Study will be the first step towards the European Commission resuming efforts to reform the TOMS rules. The current rules date back to 1977, and since then numerous European case law decisions, coupled with varying interpretations of the rules themselves by Member States, have introduced layers of complexity that have simply not kept pace with developments in the travel sector.

The findings of this work were published before Christmas. The report highlights significant intricacy and inconsistency between the application of the TOMS rules in different Member States, which will no doubt be familiar to many travel businesses. The European Commission’s brief particularly focussed on differences in treatment of business-to-business travel services (including wholesale supplies) in different Member States.

The KPMG Report also comments on a number of reform options earmarked for consideration by the European Commission. This reform is likely in the coming years to impact significantly on travel businesses established in the EU. It is also expected that the European Commission will take this opportunity to extend the scope of European VAT to travel services sold by businesses established outside the EU, to level the VAT playing field in light of increasing involvement of online non-EU businesses in the EU travel market. This could be achieved by changes to the place of supply rules for TOMS supplies. In summary, the Report shows there is a strong case that TOMS should be retained, but rules changed to ensure consistency of treatment across the EU, including a possible opt-out for B2B supplies.

For the UK travel sector, Brexit brings further uncertainty. The current UK TOMS rules are intrinsically linked to the UK’s membership of the EU, and it remains to be seen what changes the UK will make to these rules in a post-Brexit world. One thing we can be sure of is that the VAT landscape for travel businesses will not remain quite as we know it over the coming years.

For further information please contact:

Paul Stewart

Mike Camburn

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