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Document 52012DC0605
REPORT FROM THE COMMISSION TO THE COUNCIL on the place of taxation of the supply of goods and the supply of services, including restaurant services, for passengers on board ships, aircraft, trains or buses drawn up in accordance with Article 37(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
REPORT FROM THE COMMISSION TO THE COUNCIL on the place of taxation of the supply of goods and the supply of services, including restaurant services, for passengers on board ships, aircraft, trains or buses drawn up in accordance with Article 37(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
REPORT FROM THE COMMISSION TO THE COUNCIL on the place of taxation of the supply of goods and the supply of services, including restaurant services, for passengers on board ships, aircraft, trains or buses drawn up in accordance with Article 37(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
/* COM/2012/0605 final */
REPORT FROM THE COMMISSION TO THE COUNCIL on the place of taxation of the supply of goods and the supply of services, including restaurant services, for passengers on board ships, aircraft, trains or buses drawn up in accordance with Article 37(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax /* COM/2012/0605 final */
REPORT
FROM THE COMMISSION TO THE COUNCIL on the place of taxation of the supply of
goods and the supply of services, including restaurant services, for passengers
on board ships, aircraft, trains or buses drawn up in accordance with Article
37(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system
of value added tax TABLE OF CONTENTS 1........... Background and scope of the
report............................................................................... 3 2........... Description of the current rules
governing the supply of goods and services carried out on board means of
transport...................................................................................................................................... 3 2.1........ Necessity of particular rules for
supplies of goods and services carried out on board means of transport 3 2.2........ Place of supply............................................................................................................... 4 2.3........ Exemption for on board supplies..................................................................................... 5 3........... Main problems identified................................................................................................. 5 3.1........ Implementation and understanding
of certain concepts..................................................... 5 3.1.1..... Concept of ‘the Community section’
of a passenger transport effected in the Community.. 6 3.1.2..... Treatment of "stopovers"................................................................................................. 6 3.1.3..... Concepts of 'consumption on board'
and 'restaurant and catering services'....................... 6 3.2........ Services other than catering and
restaurant services......................................................... 7 3.3........ Scope of the exemption applied...................................................................................... 7 3.4........ Particular issues highlighted by
stakeholders..................................................................... 7 3.5........ The specific situation of
supplies performed on board cruises........................................... 8 4........... The way forward............................................................................................................ 8 1. Background
and scope of the report In accordance with Article 37(3) of
Council Directive 2006/112/EC of 28 November 2006 on the common system of
value added tax[1]
(hereinafter: 'VAT Directive') the Commission shall, at the earliest
opportunity, present to the Council a report, accompanied if necessary by
appropriate proposals, on the place of taxation of the supply of goods for
consumption on board and the supply of services, including restaurant services,
for passengers on board ships, aircraft or trains. Council Directive 2008/8/EC of
12 February 2008[2]
(which amended the VAT Directive in particular on the rules on the place of
supply of services), was accompanied by the following minutes statement: "The
Council and the Commission agree that this proposal is without prejudice to the
review provided for in Article 37 of Directive 2006/112/EC of the place of
taxation of the supply of goods for consumption on board and the supply of
services, including restaurant services, for passengers on board ships,
aircraft or trains. This duty to review shall also explicitly cover services
provided on board ships (including cruise ships), and shall also extend to the
new rule determining the place of supply as laid down in Article 57 of
Directive 2006/112/EC.". This report focuses on the place of
taxation of goods for consumption and of services, including restaurant
services, supplied to passengers on board ships, aircraft or trains. However, in
order to complete the picture of that segment of the market, it also addresses
other issues such as the treatment of take-away goods supplied on board,
supplies on board buses, as well as exemptions currently applied in this
sector. In preparing this report, the Commission
took various steps to create the broadest possible overview of the situation in
the sector. First of all, businesses that are active in this sector were
invited to give their assessment of the current situation, including the
problems they face and suggest possible solutions for the future. Member States
were also invited to outline their current practices and their expectations in
this field. Finally, an expert study (hereinafter: 'the expert study') was
conducted by an external contractor[3]
(published with this report). 2. Description
of the current rules governing the supply of goods and services carried out on
board means of transport 2.1. Necessity of particular rules for supplies of goods and
services carried out on board means of transport The nature of supplies of goods and
services as such is the same, whether or not they are carried out on board.
However, for goods and services supplied on-board means of transport, their
physical place of supply is changing, as the supply takes place on a 'platform'
which is normally moving from one place to another. In other words, the goods
and services are not transported in order to be supplied, but are supplied
while moving. Therefore, because of those special
circumstances under which on-board supplies are performed, particular rules
apply. Their aim is to ensure to the extent possible taxation where consumption
takes place, without making the application of these rules overly complex. Particular rules are justified, but it
should be emphasized that although on-board supplies take place in a particular
environment, when supplied within the territory of the EU, the actual
consumption to which they give rise is on its territory and, as a matter of principle,
they should not be treated differently for taxation purposes in comparison to
the same supplies performed elsewhere in the EU. 2.2. Place of supply Under Articles 37(1) and 57(1) of the
VAT Directive, the place of supply of goods and catering and restaurant
services supplied on board ships, aircraft or trains during "the
section of a passenger transport operation effected within the Community"
shall be deemed to be at the point of departure of the passenger transport
operation. According to Articles 37(2) and 57(2),
'the section' (hereinafter: 'the Community section') is defined as "the
section of the operation effected, without a stopover outside the Community,
between the point of departure and the point of arrival of the passenger
transport operation". The 'point of departure' means "the
first scheduled point of passenger embarkation within the Community, where
applicable after a stopover outside the Community". The 'point of
arrival' means "the last scheduled point of disembarkation within the Community
of passengers who embarked in the Community, where applicable before the
stopover outside the Community". It means that part of the journey of
the means of transport between the EU border and the first scheduled point of
passenger embarkation within the Community takes place outside ‘the Community
section’. The same situation occurs for part of the journey between the last
scheduled point of passenger disembarkation and the EU border. A 'stopover' means a stop which is not a
scheduled point of passenger embarkation or disembarkation[4]. Article 37(1) and (2) applies to all
goods supplied on board ships, aircraft or trains, whether or not for
consumption on board, during the Community section. Article 57 only
applies to restaurant and catering services physically carried out on board
ships, aircraft or trains. For other services supplied on board, no particular
rules are laid down. For goods supplied on board, but outside
the Community section, Article 31 of the VAT Directive is applicable.
According to this provision, where goods are not dispatched or transported,
the place of supply shall be deemed to be the place where the goods are located
at the time when the supply takes place. Article 31 also applies in
the case where goods are supplied on board other means of transport, such as
buses. For catering and restaurant services
supplied on board, but outside the Community section, Article 55 of the
VAT Directive applies. According to this provision "the place of supply
of catering and restaurant services other than those physically carried out on
board ships, aircraft and trains during the section of passenger transport
operation, effected within the Community, shall be where the services are
physically carried out". 2.3. Exemption for on board supplies In accordance with Article 37(3) of
the VAT Directive "pending the adoption of the proposals (…), Member
States may exempt or continue to exempt, with deductibility of the VAT paid at
the preceding stage, the supply of goods for consumption on board (…)"
ships, aircraft and trains when those goods were supplied during the Community
section. This provision only allows exemption for
goods supplied for consumption on board and does not extend to goods to be
taken away by passengers. Supplies on board other means of transport, such as buses,
are not covered and can therefore not benefit from exemption. No exemption is provided for services
consumed on board, such as catering and restaurant services. However, Article 371
and Annex X, Part B, point 10, of the VAT Directive does allow
Member States to continue to exempt "the transport of passengers
and, in so far as the transport of the passengers is exempt, the transport of
goods accompanying them, such as luggage or motor vehicles, or the supply of
services relating to the transport of passengers". This is a
standstill provision that can be maintained until the definitive arrangements are
adopted, and is available only for Member States having applied it on
1 January 1978 or for Member States which acceded the Union after that
date, having obtained a specific derogation upon accession (see
Articles 375 to 390b). Whilst it can be argued that catering and
restaurant services could be exempted on the basis of this standstill
provision, other services, such as hairdressing services during cruises, cannot
qualify as being "services related to the transport of passengers". 3. Main
problems identified One of the main problems identified is the
divergence of application between Member States. It is apparent that exemptions
are applied differently by Member States and that some rules are not entirely
respected or are understood differently. The expert study has highlighted
practical problems put forward by stakeholders[5].
The difference in application is the main cause of complexity, and results in
an increase in administrative burdens for business. Failure to harmonise
exemption can also create distortions of competition. 3.1. Implementation and understanding of certain concepts Problems have been identified with certain
concepts to be found in Articles 37 and 57 of the VAT Directive.
Notwithstanding existing definitions, certain Member States are applying these
concepts in different ways. It appears that ships and aircraft on international
routes are especially concerned. In particular, it appears that there are
situations where the national provisions implementing Articles 37 and 57
do not cover all three means of transport (ships, aircraft and trains). For buses, the legal provisions are correct
in all Member States. However, there are some doubts about their correct
application in practice and how they can be controlled. 3.1.1. Concept of ‘the Community section’ of a passenger
transport effected in the Community In at least three Member States the
definition of the Community section is not entirely clear[6]. Typically certain elements of
the definition are missing – for example, there is no definition of the point
of departure and/or the point of arrival or the definition used is only a partial
one. In one Member State there is no definition of the Community section at
all. In five Member States the onboard supply of
goods and services is taxable to a different extent outside their territory,
regardless of where – inside or outside the Community section – they should
have been taxed in accordance with the rules[7].
Council Implementing Regulation (EU)
No 282/2011 (hereinafter: 'VAT Implementing Regulation')[8] has provided some
clarification, but this differentiation remains complicated and leaves the door
open to misinterpretation and inconsistency. 3.1.2. Treatment of "stopovers" Divergences are observed between Member
States in relation to the treatment of stopovers in comparison to the first
point of embarkation or the last point of disembarkation of passengers within
the EU. In at least ten Member States, the dividing line seems not to be correct.[9] According to the expert study,
some Member States consider that when passengers can get off of a means of
transport to visit a place and, after this excursion, get back on board to
continue their journey, this is regarded as disembarkation and embarkation of
passengers. This concerns the cruise industry in particular. If no new passengers can get on and none of
the passengers on board can permanently leave the ship, this should not be
regarded as embarkation or disembarkation. Such a situation must be regarded instead
as a stopover. Where a stopover is treated as a first point of embarkation or a
last point of disembarkation, this may give rise to difficulties, where –
because of varying interpretations of the Community section – more than one
Member State wants to tax the same supplies. Finally, the treatment of unscheduled
stopovers might give rise to types of difficulties similar to those described
above. However, the expert study does not gather any information on that point.
3.1.3. Concepts of 'consumption on board' and 'restaurant and
catering services' The expert study identified certain
problems with these concepts. Consumption on board: There is no definition in the VAT Directive, and only a few Member
States have provided official guidance, which varies from one Member State to
another. Catering and restaurant services: A clear definition has only been available since 1 July 2011[10]. Prior to that, the
understanding of this concept was based on guidance provided by the Court of
Justice of the European Union (hereinafter: 'CJEU'), in particular by its
judgment in the Faaborg-Gelting Linien case[11]. The concept was further
developed in the Bog case[12]
in respect of which the CJEU gave a ruling on 10 March 2011, where it was
specified in more detail what should be the level of sufficient support
services to recognise the supply as a catering service. Subject to these
developments, the problems of definition should be minimised. However, one
cannot rule out the possibility that further clarification will be needed, particularly
in order to align the VAT Implementing Regulation with the recent case law. 3.2. Services other than catering and restaurant services As only catering and restaurant services
are covered by Articles 55 and 57 and taxed in accordance with the
particular rules described above, all other services should be treated in the
same way, whether or not they are provided on board means of transport. Some
questions have arisen, particularly with regard to services provided to a person
(such as hairdressers, beauticians…), but it has not as yet been possible to
clearly identify those services for which a particular rule would be necessary.
3.3. Scope of the exemption applied One group of Member States exempts goods
for consumption on board ships, aircraft or trains as provided for in
Article 37(3) of the VAT Directive. However, at least two Member States
also allow exemption of on-board supplies of goods made whilst within the
territory of the Community, but outside the Community section, which is not
authorised by Article 37(3) of the VAT Directive[13]. Furthermore, it appears that eight Member
States also exempt services supplied to passengers on board ships, aircraft or
trains, in particular restaurant and catering services[14]. The Commission considers that
Article 37 only allows an exemption of the supply of goods for consumption
on board ships, aircraft or trains carried out during the Community section.
The exemption provided for in Article 37 does not cover goods which are to
be taken away, or any services. Exemption in such cases is only possible
pursuant to Article 371 and Annex X, Part B, point 10,
which allow Member States to continue to exempt "in so far as the
transport of passengers is exempted, […] the supply of services relating to the
transport of passengers". It appears that five Member States exclude
on-board supplies from any taxation to a different extent through the way in
which the place-of-supply rules are applied[15].
They consider those supplies to be outside the territorial scope of VAT. As a
result they do not require any specific rules to provide for exemption. The incorrect application of the rules on
the territorial scope of VAT or of the exemption only seems to concern ships
and aircraft. For trains and buses, the rules seem to be implemented correctly
in all Member States. The divergence in actual taxation between Member States
is seen as one of the main problems with the current situation, as it can have serious
implications for the businesses concerned and distorts competition, especially
between competitors established within the EU and outside the EU. 3.4. Particular issues highlighted by stakeholders The stakeholders who were consulted stressed
that the current legal framework is complex (as it requires the application of
different sets of rules – Articles 31 and 55 or Articles 37 and 57 –
within the EU) and varies from one Member State to another. The various
exemption schemes, although greatly appreciated, are applied differently by
Member States and this is seen as a complication. Not surprisingly, a
harmonised exemption is the preferred option. Stakeholders also underlined the lack of
clear-cut definitions as a cause of serious difficulties, in particular when a
business operates in more than one Member State, which is normally the case in
this sector. The divergent rates applicable were also mentioned. Stakeholders highlighted the difficulties that
they encounter when making onboard supplies of goods or services for which they
are liable to pay VAT in a Member State where they are not established and have
to register for VAT purposes. They pointed to difficulties linked with
differences between Member States concerning technical requirements for cash registers
and obligations, VAT rates and different currencies. These difficulties are no different from
those encountered by any other business liable to pay VAT in a Member State
where it is not established, and stakeholders regret that there are no simplifications
or schemes, like a one stop shop (OSS), available to them. Some stakeholders admitted that they
register in some Member States only, and not in all Member States in which they
would be required to do so under the current provisions. 3.5. The specific situation of supplies performed on board
cruises The particular feature of the cruise
industry is that cruises often start and end in the same harbour. Therefore it
seems that the prime purpose of a cruise journey is not to transport passengers
from one place to another. Further, the itinerary of a cruise ship may
vary and is more flexible compared to other means of transport. During the process of collecting
information on the current state of play in relation to on-board supplies, the
cruise and ferry industry was the most active in terms of its response. That
industry emphasized that, for its activities, the rules are particularly
complicated and suggested that all on-board supplies of goods and services
should be exempted. On board cruise ships, a wider variety of
goods and services are available than is the case for other means of transport.
For example, services such as those of hairdressers, tailors, beauticians,
entertainment and educational activities are on offer. The variety of goods is
also much broader. The cruise industry emphasized that there
is strong competition between operators in that segment of the market. The way in
which rules are formulated influences the competitive position, especially
between competitors established within the EU and outside the EU. During the process of consultation it was
suggested that, for cruises, the boat could in many cases be considered to be a
fixed establishment, as the supplies performed are complex and frequently
require sophisticated arrangements[16]. 4. The
way forward The goods and services covered by this
report are typical consumer products on which VAT is normally charged when they
are supplied within the territory of the EU. As a matter of principle, the fact
that the same goods and services are supplied on board certain means of
transport cannot be a sufficient justification for exempting those supplies
within the EU from VAT. This report is not presented as such in the
framework on the VAT strategy set out in the Commission's Communication on the
future of VAT. Nevertheless, the future treatment of the transactions involved
should be consistent with the guiding principles of that strategy, in
particular the need to increase the efficiency of the tax by broadening the tax
base, but also the need for simple rules. Given that the main purpose of VAT is to
raise revenues and to tax consumption, the Commission is of the opinion that
the actual taxation of supplies of goods and services taking place on board of
means of transport should be an objective to be pursued in the future. Removing
the exemption would also be in line with the need to make the tax systems more
efficient. Preparing for the future work to be undertaken in that field, the
Commission is aware that in the expert study almost all consulted stakeholders
(in particular representatives of the cruise industry), who replied to the
survey sent to them by the contractor of the study, indicated that it is
desirable for them to keep the optional VAT exemption, as they fear a negative
economic, social and environmental impact. The Commission also acknowledges stakeholders’
complaints about the complexity of the current situation. This complexity stems
from the divergent application and interpretation of the current rules, the
legal framework itself and the burden of administrative compliance resulting
from the two previous factors, notably (i) the patchwork of exemptions, (ii)
the definition of 'the Community section', (iii) the definition of restaurant
and catering services, and (iiii) the understanding of notions of 'stopover'
and 'non-scheduled stops'. In this respect, the Commission will verify which
kind of clarifications could be agreed with Member States in order to address
the current uncertainties. The VAT Committee could be used in this respect in
order to reach common guidelines. The Commission will also examine further
the situation in order to assess if infringement procedures should be
undertaken for some Member States. Even if the abovementioned complexities can
be solved, it is questionable whether the current rules laid down in the VAT
Directive are satisfactory for ensuring the taxation of the transactions at
stake in a simple, efficient and robust way. In the view of the Commission, the
application of these rules would still be complex for businesses and, in many
cases, difficult or even impossible to control for tax authorities. In the Commission’s view, a change in the
taxation of supplies on board means of transport giving rise to consumption in
the EU cannot be achieved for the supplies on board alone, without putting
these questions in the broader perspective of the design of a simpler and more
neutral VAT framework for passenger transport activities in general. In order to ensure such consistency, a
legislative proposal in this field should be adopted, together with the
proposals that will be made for passenger transport activities, following a comprehensive
impact assessment These proposals should ensure that the
actual taxation of the supplies on board means of transport is simple and
neutral. Moreover, there is an acute need to make
the rules less complex than is currently the case, and the obligations to be
fulfilled by the operators should also be as light as possible. However, everything
depends on the choice that will be made on the taxation system as such. If the rules adopted mean that operators
are liable to pay tax in Member States where they are not established, the case
for a form of one stop shop (OSS) to simplify compliance would clearly have to
be examined. As the Communication on the future of VAT pointed
out, such a measure could only be considered after 2015, based on the
experience from the mini one stop shop (MOSS) that will be implemented for
telecommunications, radio and television broadcasting and electronic services
supplied by non-established suppliers to non-taxable persons (final consumers).
The Commission is of the opinion that the issues
linked with supplies on board means of transport should be addressed in
conjunction with the passenger transport activities where, in accordance with
the Communication on the future of VAT, a more neutral and simpler VAT
framework for passenger transport activities will be proposed[17]. First of all these issues are
closely related and, secondly, the types of challenges and difficulties being
faced are similar. The Commission therefore considers that it
is not opportune to accompany the present report with specific legislative
proposals. The Council is invited to express its views
on the content of this report and, in particular, on the way the Commission
suggests to take this file forward. At the same time, other institutions are
welcome to give their opinion on this report and the suggested way forward, if
they wish to do so. [1] OJ L 347, 11.12.2006, p. 1 [2] OJ L 44, 20.2.2008, p. 11 [3] "Expert study on the issues arising from taxing
the supply of goods and the supply of services, including restaurant and
catering services, for consumption on board means of transport", of
8 February 2012 undertaken by PricewaterhouseCoopers. [4] The question of how the notion of "the
stop" should be understood was developed in more detail by the Court of
the European Union in its judgment of 15 September 2005 in case C-58/04,
Antje Köhler v Finanzamt Düsseldorf-Nord. [5] For detailed information, see chapter 4 of the
expert study – in particular pages 48-50, 55 and 58. [6] Look chapter 4 of the expert study, in
particular pages 39-40 and 42-43. [7] Look chapter 4 of the expert study, in
particular pages 42-43 and 52-55. [8] See in particular Articles 35 to 37. [9] Look chapter 4 of the expert study, in
particular pages 40 and 42-43. [10] According to Article 6 of the VAT Implementing
Regulation, “Restaurant and catering services mean services consisting of the
supply of prepared or unprepared food or beverages or both, for human
consumption, accompanied by sufficient support service allowing for the
immediate consumption thereof. The provision of food or beverages or both is
only one component of the whole in which services shall predominate. Restaurant
services are the supply of such services on the premises of the supplier, and
catering services are the supply of such services off the premises of the
supplier.”. [11] Case C-231/94, judgment of the CJEU of 2 May 1996,
Faaborg-Gelting Linien a/s v Finanzamt Flensburg. [12] Joined cases C-497/09, C-499/09, C-501/09, C-502/09,
judgment of the CJEU of 10 March 2011, Bog and Others v Finanzamt
Burgdorf, Hamburg-Barmbek-Uhlenhorst, Minden and Detmold. [13] Look chapter 4 of the expert study, in particular
at pages 52 and 53. [14] Look chapter 4 of the expert study, in particular
at pages 54 and 55. [15] Look chapter 4 of the expert study, in particular
at pages 42-43 and 52-55. [16] It should be noted that the concept of a fixed
establishment is defined in Article 11 of the VAT Implementing Regulation. [17] See COM(2011) 851 action n°9