{ "attribution": { "source": "legal.exploreworldai.com", "canonical": "https://legal.exploreworldai.com/api/public/v1/judgment-text?id=eu:c-565-24", "cite_as": "NovaCopilot, legal.exploreworldai.com (https://legal.exploreworldai.com/api/public/v1/judgment-text?id=eu:c-565-24)", "license": "https://legal.exploreworldai.com/revision", "version": "legal-2026-10-09", "fingerprint": "ewai:eu:af38ec", "proof": "sha256:11dbe83e2b66204e19849c2b8acc622bccf17a71783c9e851a451f21cd1f67ab", "jurisdiction": "eu", "lang": "en", "publisher": "NovaCopilot by ExploreWorld Legal", "terms": "https://legal.exploreworldai.com/om" }, "brand_source": "Source: NovaCopilot", "item": { "schema_version": "1.0.0", "id": "eu:c-565-24", "jurisdiction": "eu", "lang": "en", "brand_source": "Source: NovaCopilot", "brand": { "product": "NovaCopilot", "platform": "ExploreWorldAI", "infrastructure": "ExploreWorld Legal", "infrastructure_url": "legal.exploreworldai.com", "legal_entity": "Valkiv Ventures AB", "permanent_url": "https://legal.exploreworldai.com/novacopilot", "source": "Source: NovaCopilot", "powered_by": "Powered by NovaCopilot", "license": "https://legal.exploreworldai.com/licensvillkor" }, "sections": [ { "title": "Provisional text", "paragraphs": [] }, { "title": "JUDGMENT OF THE COURT (Second Chamber)", "paragraphs": [] }, { "title": "10 September 2026 ( * )", "paragraphs": [ "para_4", "para_5", "para_6" ] }, { "title": "P-GmbH & Co. KG", "paragraphs": [ "para_8", "para_9", "para_10", "para_11", "para_12" ] }, { "title": "Registrar: D. Dittert, Head of Unit", "paragraphs": [ "para_14", "para_15", "para_16", "para_17", "para_18", "para_19", "para_20" ] }, { "title": "Judgment", "paragraphs": [ "para_22", "para_23" ] }, { "title": "Legal context", "paragraphs": [] }, { "title": "European Union law", "paragraphs": [ "para_26", "para_27", "para_28", "para_29", "para_30", "para_31", "para_32", "para_33", "para_34", "para_35" ] }, { "title": "German law", "paragraphs": [ "para_37", "para_38", "para_39", "para_40", "para_41" ] }, { "title": "The dispute in the main proceedings and the questions referred for a preliminary ruling", "paragraphs": [ "para_43", "para_44", "para_45", "para_46", "para_47", "para_48", "para_49", "para_50" ] }, { "title": "The first and second questions referred", "paragraphs": [ "para_52", "para_53", "para_54", "para_55", "para_56", "para_57", "para_58", "para_59", "para_60", "para_61", "para_62", "para_63", "para_64", "para_65", "para_66", "para_67", "para_68", "para_69", "para_70", "para_71" ] }, { "title": "The third question", "paragraphs": [ "para_73", "para_74", "para_75", "para_76", "para_77", "para_78", "para_79", "para_80", "para_81", "para_82", "para_83", "para_84" ] }, { "title": "Costs", "paragraphs": [ "para_86" ] }, { "title": "On those grounds, the Court (Second Chamber) hereby rules:", "paragraphs": [ "para_88", "para_89", "para_90", "para_91", "para_92", "para_93" ] } ], "paragraphs": [ { "text": "Provisional text", "paragraph_id": "para_1" }, { "text": "JUDGMENT OF THE COURT (Second Chamber)", "paragraph_id": "para_2" }, { "text": "10 September 2026 ( * )", "paragraph_id": "para_3" }, { "text": "( Reference for a preliminary ruling – Common system of value added tax (VAT) – Sixth Directive 77/388/EEC – Special schemes – Article 26 – Travel agents – Excursion organised by a trader away from his or her business premises – Taxation under the margin scheme without deduction of the input VAT paid – Negative margin potentially leading to a VAT refund – ‘Coffee trips’ )", "paragraph_id": "para_4" }, { "text": "In Case C‑565/24,", "paragraph_id": "para_5" }, { "text": "REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Fiscal Court, Germany), made by decision of 20 June 2024, received at the Court on 21 August 2024, in the proceedings", "paragraph_id": "para_6" }, { "text": "P-GmbH & Co. KG", "paragraph_id": "para_7" }, { "text": "v", "paragraph_id": "para_8" }, { "text": "Finanzamt Q,", "paragraph_id": "para_9" }, { "text": "THE COURT (Second Chamber),", "paragraph_id": "para_10" }, { "text": "composed of K. Jürimäe, President of the Chamber, K. Lenaerts, President of the Court, acting as Judge of the Second Chamber, F. Schalin (Rapporteur), M. Gavalec and Z. Csehi, Judges,", "paragraph_id": "para_11" }, { "text": "Advocate General: M. Szpunar,", "paragraph_id": "para_12" }, { "text": "Registrar: D. Dittert, Head of Unit", "paragraph_id": "para_13" }, { "text": "having regard to the written procedure and further to the hearing on 11 September 2025,", "paragraph_id": "para_14" }, { "text": "after considering the observations submitted on behalf of:", "paragraph_id": "para_15" }, { "text": "–        P-GmbH & Co. KG, by S. Kim, E.-M. Kraus, T. Nayin and S. Schauhoff, Rechtsanwälte,", "paragraph_id": "para_16" }, { "text": "–        the German Government, by J. Möller and R. Kanitz, acting as Agents,", "paragraph_id": "para_17" }, { "text": "–        the European Commission, by B. Eggers and M. Herold, acting as Agents,", "paragraph_id": "para_18" }, { "text": "after hearing the Opinion of the Advocate General at the sitting on 27 November 2025,", "paragraph_id": "para_19" }, { "text": "gives the following", "paragraph_id": "para_20" }, { "text": "Judgment", "paragraph_id": "para_21" }, { "text": "1         This request for a preliminary ruling concerns the interpretation of Article 26 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1; ‘the Sixth Directive’).", "paragraph_id": "para_22" }, { "text": "2         The request has been made in proceedings between P-GmbH & Co. KG (‘P’), a company incorporated under German law which organises tourist excursions in order to promote the sale of goods which it markets, and Finanzamt Q (Tax Office Q, Germany) concerning a value added tax (‘VAT’) assessment notice relating to those excursions.", "paragraph_id": "para_23" }, { "text": "Legal context", "paragraph_id": "para_24" }, { "text": "European Union law", "paragraph_id": "para_25" }, { "text": "3         The first sentence of Article 12(1) of the Sixth Directive was worded as follows:", "paragraph_id": "para_26" }, { "text": "‘The rate applicable to taxable transactions shall be that in force at the time of the chargeable event.’", "paragraph_id": "para_27" }, { "text": "4         Article 26 of that Directive, entitled ‘Special scheme for travel agents’, provided:", "paragraph_id": "para_28" }, { "text": "‘1.      Member States shall apply [VAT] to the operations of travel agents in accordance with the provisions of this Article, where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities. This Article shall not apply to travel agents who are acting only as intermediaries and accounting for tax in accordance with Article 11A(3)(c). In this Article travel agents include tour operators.", "paragraph_id": "para_29" }, { "text": "2.      All transactions performed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has provided the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22(3)(b), in respect of this service shall be the travel agent’s margin, that is to say, the difference between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and services provided by other taxable persons where these transactions are for the direct benefit of the traveller.", "paragraph_id": "para_30" }, { "text": "…", "paragraph_id": "para_31" }, { "text": "4.      [VAT] charged to the travel agent by other taxable persons on the transactions described in paragraph 2 which are for the direct benefit of the traveller, shall not be eligible for deduction or refund in any Member State.’", "paragraph_id": "para_32" }, { "text": "5         The first indent of Article 1(1) of Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31) provided:", "paragraph_id": "para_33" }, { "text": "‘This Directive shall apply to contracts under which a trader supplies goods or services to a consumer and which are concluded:", "paragraph_id": "para_34" }, { "text": "–        during an excursion organised by the trader away from his business premises’.", "paragraph_id": "para_35" }, { "text": "German law", "paragraph_id": "para_36" }, { "text": "6         Paragraph 25 of the Umsatzsteuergesetz (Law on turnover tax), in the version applicable to the dispute in the main proceedings, provided:", "paragraph_id": "para_37" }, { "text": "‘1.      The following provisions shall apply to travel services provided by a trader that are not provided for the purposes of the customer’s business, where the trader deals with customers in his or her own name and makes use of travel-related inputs. The service provided by the trader is deemed to fall within the category of other services. If the trader provides several services of this nature to a customer in the context of one journey, those services will be deemed to be the provision of a single service falling within the other services category. The place at which the other service is provided shall be determined in accordance with Paragraph 3a(1). Travel-related inputs are supplies and other services provided by third parties which are for the direct benefit of the traveller.", "paragraph_id": "para_38" }, { "text": "…", "paragraph_id": "para_39" }, { "text": "3.      The taxable value of other services shall be the difference between the amount paid by the customer for the service and the amount paid by the trader for travel-related inputs. [Value added tax] shall not form part of the taxable amount. Instead of calculating the taxable amount for each individual service supplied, the trader may calculate it either for groups of services or for all the services provided within the taxation period.", "paragraph_id": "para_40" }, { "text": "4.      By way of exception to Paragraph 15(1), the trader may not deduct as input tax the tax charged to that trader, separately, for travel-related inputs. Otherwise, Paragraph 15 shall apply in full. …’", "paragraph_id": "para_41" }, { "text": "The dispute in the main proceedings and the questions referred for a preliminary ruling", "paragraph_id": "para_42" }, { "text": "7         Between 1997 and 1999 P organised excursions combined with the sale of goods, commonly referred to in Germany as ‘ Kaffeefahrten ’ (‘coffee trips’). During those excursions, the participants were transported by coach to visit tourist sites where they received a meal and had the opportunity to participate in an additional tourist programme. They were also invited to participate in sales events at which various goods were offered for sale by P.", "paragraph_id": "para_43" }, { "text": "8         P purchased transport services that were necessary for those excursions from other taxable persons and offered those services in its own name to the participants. In order to participate in the excursion, those participants paid a fee which did not, however, cover in full the costs incurred by P to purchase those transport services. The remainder of those costs, as well as the costs of other services that the participants did not incur were covered by the revenue from the sale of goods, on the understanding that the purchase of goods was not mandatory. From the point of view of the VAT legislation, those sales constituted the supplies of goods separate from the transport services in respect of which the participants paid the fee. During those years, P offered an increasing number of free trips for the participants, in respect of which all the costs were covered by the revenue from the sale of goods.", "paragraph_id": "para_44" }, { "text": "9         P applied the general VAT rules to its activity and deducted all the VAT paid in respect of the services purchased from other taxable persons, which initially the German tax authority did not dispute. However, following tax audits and the administrative and judicial procedures that followed, P’s right to deduct VAT on transport costs was recognised only to the extent that those costs related to transport services in respect of which the payment was not claimed from the participants. By contrast, so far as concerns the excursions in respect of which the participants paid P a fee covering the cost of the transport services in part, the Niedersächsisches Finanzgericht (Finance Court, Lower Saxony, Germany), thereby confirming the position of the German tax authority, held, by decision of 12 May 2022, that those services fell under the special scheme for travel agents, and that P could not therefore deduct the VAT that it had paid when purchasing those services from other taxable persons. P brought an appeal against that decision before the Bundesfinanzhof (Federal Fiscal Court, Germany), which is the referring court.", "paragraph_id": "para_45" }, { "text": "10       That court is uncertain whether the ‘excursions’ component of the activity carried out by P should be subject to the special scheme for travel agents, as provided for in Article 26 of the Sixth Directive. That question arises because, contrary to the situation faced by travel agents, the ‘excursions’ component of P’s activity systematically generates a negative margin in respect of that activity. Accordingly, although P was subject to that special scheme, it follows that the input VAT paid by P on the tourist services provided to it is neither deductible nor covered by the fee for the excursions charged to the participants. Since that special scheme is applicable to the margin achieved by the taxable person, which is generally profitable, the question arises as to whether such application is possible where the activity at issue systematically generates a negative margin.", "paragraph_id": "para_46" }, { "text": "11       In those circumstances, the Bundesfinanzhof (Federal Fiscal Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:", "paragraph_id": "para_47" }, { "text": "‘(1)      Does an “excursion organised by the trader away from his business premises” within the meaning of the first indent of Article 1(1) of Directive [85/577] fall within the scope of “transactions performed by the travel agent in respect of a journey” within the meaning of the first sentence of Article 26(2) of [the Sixth Directive]?", "paragraph_id": "para_48" }, { "text": "(2)      If the first question is to be answered in the affirmative: Is the special scheme for travel agents under Article 26 of [the Sixth Directive] applicable even if the margin, which is the taxable amount under the third sentence of Article 26(2) of [the Sixth Directive], is negative because the actual cost exceeds the “total amount” to be paid by the traveller “exclusive of value added tax”?", "paragraph_id": "para_49" }, { "text": "(3)      If the first and second questions are to be answered in the affirmative: Is the first sentence of Article 12(1) of [the Sixth Directive] applicable to the margin, which is the taxable amount within the meaning of the third sentence of Article 26(2) of [the Sixth Directive], even if the margin is negative, such that a negative margin results in a refund to the taxable person?’", "paragraph_id": "para_50" }, { "text": "The first and second questions referred", "paragraph_id": "para_51" }, { "text": "12       By its first and second questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 26 of the Sixth Directive must be interpreted as applying to a situation in which a taxable person purchases tourist services from third parties, in particular transport services, in order to sell them in his or her own name to consumers in the form of excursions, where the fee received in that respect does not cover all the costs of those services and the remainder of those costs is financed by the revenue from the sale of goods that that taxable person offers to those consumers during those excursions.", "paragraph_id": "para_52" }, { "text": "13       It must be recalled that the scheme under Article 26 of the Sixth Directive applies to traders who organise travel or tour packages in their own name and entrust other taxable persons with the supply of the services generally associated with that kind of activity, even if they are not, formally speaking, travel agents or tour operators (judgment of 22 October 1998, Madgett and Baldwin , C‑308/96 and C‑94/97, EU:C:1998:496, paragraph 23).", "paragraph_id": "para_53" }, { "text": "14       In that regard, it is settled case-law of the Court of Justice that the services provided by travel agents and tour operators most frequently consist of multiple services, in particular transport and accommodation, supplied either within or outside the territory of the Member State in which the undertaking has established its business or has a fixed establishment. The application of the normal rules on place of taxation, taxable amount and deduction of input tax would, by reason of the multiplicity of services and the places in which they are provided, entail practical difficulties for those undertakings of such a nature as to obstruct their operations. In order to adapt the applicable rules to the specific nature of such operations, the Community legislature set up a special VAT scheme in Article 26(2) to (4) of the Sixth Directive (judgments of 22 October 1998, Madgett and Baldwin , C‑308/96 and C‑94/97, EU:C:1998:496, paragraph 18, and of 13 October 2005, ISt , C‑200/04, EU:C:2005:608, paragraph 21 and the case-law cited).", "paragraph_id": "para_54" }, { "text": "15       However, the Court has also held that, although the principal reason for the special margin scheme under that Article 26 is the existence of problems in connection with travel services which include elements in more than one Member State, the wording of that provision is such that it applies also to supplies of services within a single Member State (judgment of 22 October 1998, Madgett and Baldwin , C‑308/96 and C‑94/97, EU:C:1998:496, paragraph 19).", "paragraph_id": "para_55" }, { "text": "16       In addition, the underlying reasons for the special scheme for travel agents and tour operators are equally valid where the trader is not a travel agent or tour operator within the normal meaning of those terms, but provides services which are identical or, at the very least, comparable in the context of another activity. To interpret Article 26 of the Sixth Directive as applying solely to traders who are travel agents or tour operators within the normal meaning of those terms would mean that identical services or, at the very least, comparable services would come under different provisions depending on the formal classification of the trader (see, to that effect, judgments of 22 October 1998, Madgett and Baldwin , C‑308/96 and C‑94/97, EU:C:1998:496, paragraphs 20 and 21, and of 13 October 2005, ISt , C‑200/04, EU:C:2005:608, paragraphs 22 and 24).", "paragraph_id": "para_56" }, { "text": "17       In the context of the cooperation established by Article 267 TFEU, it is for the national courts to determine whether, in the circumstances of the particular case, the supply concerned falls within the special scheme set out in Article 26 of the Sixth Directive and to make all definitive findings of fact in that regard. However, it is for the Court to provide the national courts with all the guidance as to the interpretation of EU law which may be of assistance in adjudicating on the case pending before them (see judgments of 1 July 2008, MOTOE , C‑49/07, EU:C:2008:376, paragraph 30, and of 18 April 2024, Companhia União de Crédito Popular , C‑89/23, EU:C:2024:333, paragraph 38 and the case-law cited).", "paragraph_id": "para_57" }, { "text": "18       In the present case, it is apparent from the order for reference that the transactions at issue in the main proceedings consist in coach excursions which have the characteristics of travel services. In addition, it is common ground that the transport services were purchased from other taxable persons and then resold by P in its own name. It follows that the transactions at issue bear similarities to the transactions carried out by travel agents or tour operators within the normal meaning of those terms and that they may, in principle, fall within the scope of the scheme for travel agents set out in Article 26 of the Sixth Directive.", "paragraph_id": "para_58" }, { "text": "19       However, in the light of the referring court’s questions, it is necessary to determine whether the fact that those transactions were systematically carried out at a loss and that their cost was covered by a separate activity of selling goods marketed by P is of such a kind as to disprove that assessment.", "paragraph_id": "para_59" }, { "text": "20       In that regard, as regards, first, the links between the transport services at issue in the main proceedings and the supply of goods, it should be recalled that, in respect of operations for which the trader should be taxed under Article 26 of the Sixth Directive, the only relevant criterion for the application of that article is that relating to the nature of the travel service, whether ancillary or not, which in the present case is the provision of transport (see, to that effect, judgment of 13 October 2005, ISt , C‑200/04, EU:C:2005:608, paragraph 34).", "paragraph_id": "para_60" }, { "text": "21       In certain circumstances, several formally distinct supplies, which could be provided separately and thus give rise, in turn, to taxation or exemption, must be considered to be a single transaction when they are not independent. That is the case where, inter alia, one or more elements are to be regarded as constituting the principal supply, while other elements are to be regarded, by contrast, as one or more ancillary supplies which share the tax treatment of the principal supply. In that respect, a criterion to be taken into consideration is the absence of a distinct purpose of the supply from the perspective of the average consumer. Thus, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (see, to that effect, judgments of 22 October 1998, Madgett and Baldwin , C‑308/96 and C‑94/97, EU:C:1998:496, paragraphs 24 and 25, and of 18 April 2024, Companhia União de Crédito Popular , C‑89/23, EU:C:2024:333, paragraphs 36 and 37 and the case-law cited).", "paragraph_id": "para_61" }, { "text": "22       In the present case, it is apparent from the documents before the Court that although, from the point of view of a trader such as P, the organisation of excursions such as those at issue in the main proceedings is undoubtedly intended to encourage the participants to purchase the goods offered to them during those excursions, the purchase is by no means mandatory. The participants may, in fact, simply enjoy the excursion without purchasing anything. It is thus apparent that, for customers, the coach excursion may constitute an end in itself and not merely the means of better enjoying the offer for sale of goods. In addition, it is apparent from the order for reference that the revenue from the travel services at issue in the main proceedings did not represent merely a marginal amount in relation to the amount corresponding to the sale of goods, since the payment received in respect of the transport service covers on average 60% of the cost of that service.", "paragraph_id": "para_62" }, { "text": "23       In those circumstances, it must be held that the travel services offered, by a trader such as P to its customers, habitually and for a fixed fee, cannot be classified as purely ancillary services. The fact that the revenue from those services systematically generated a negative margin for that trader whose economic activity had to enable the financing of the residual cost of those services by the sale of goods carried out during those excursions cannot affect that assessment. It follows that the links between those services and the supply of goods are not such as to preclude the application, to the transactions at issue in the main proceedings, of the special scheme set out in Article 26 of the Sixth Directive.", "paragraph_id": "para_63" }, { "text": "24       Secondly, it is necessary to examine the effect of the principle of fiscal neutrality on the assessments made in the previous paragraph of this judgment in the light of the fact that the transport services were systematically carried out at a loss, with the result that the application of that special scheme would lead to the trader being unable to deduct the amount of input VAT paid.", "paragraph_id": "para_64" }, { "text": "25       It follows, in that regard, from settled case-law that the right to deduct is an integral part of the VAT scheme and may not, in principle, be limited. It is exercisable immediately in respect of all the taxes charged on input transactions. The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his or her economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see, to that effect, judgments of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments , C‑132/16, EU:C:2017:683, paragraphs 25 and 26, and of 8 February 2018, Commission v Germany , C‑380/16, EU:C:2018:76, paragraph 52).", "paragraph_id": "para_65" }, { "text": "26       It is also apparent from settled case-law that the special scheme set out in Article 26 of the Sixth Directive constitutes a derogation scheme expressly provided for by the Community legislature in order to take account of the specific nature of the activity of travel agents (judgment of 8 February 2018, Commission v Germany , C‑380/16, EU:C:2018:76, paragraph 53).", "paragraph_id": "para_66" }, { "text": "27       In that regard, it should be stated that the principle of fiscal neutrality is not a rule of primary law which can condition the validity of a derogation, but a principle of interpretation, to be applied concurrently with other principles. Accordingly, that principle cannot run counter to a derogation expressly provided for by that legislature and undermine its effectiveness (judgment of 8 February 2018, Commission v Germany , C‑380/16, EU:C:2018:76, paragraph 58 and the case-law cited).", "paragraph_id": "para_67" }, { "text": "28       It is clear from the case-law that the Community legislature did not intend to restrict the scope of Article 26 of the Sixth Directive on the basis of the objective of the travel or the results of the transactions concerned. Any other finding in that respect would be likely to seriously restrict the scope of Article 26 and would be incompatible with the special scheme it introduces (judgment of 13 October 2005, ISt , C‑200/04, EU:C:2005:608, paragraph 36). As is apparent from the case-law recalled in paragraphs 16 and 20 above, that provision applies only provided that the trader at issue provides services which are identical or, at the very least, comparable, acts in its own name and uses in its operations supplies and services provided by other taxable persons. Moreover, the only relevant criterion enabling the determination as to whether the special scheme for travel agents applies is whether or not the travel service is ancillary.", "paragraph_id": "para_68" }, { "text": "29       Therefore, the inclusion, within the scope of that special scheme, of travel services, the purpose of which is to encourage the participants to purchase the goods offered to them during those services and which systematically generates a negative margin, and the alleged exception to the principle of VAT neutrality which ensues, are the very consequence of the conditions for the application of Article 26 of the Sixth Directive (see, by analogy, judgment of 8 February 2018, Commission v Germany , C‑380/16, EU:C:2018:76, paragraph 55).", "paragraph_id": "para_69" }, { "text": "30       That conclusion is all the more compelling, furthermore, since to impose on the tax authority an obligation to carry out inquiries to determine the intention of the taxable person and the results of the transactions concerned would be contrary to the objectives of the special VAT scheme applicable to transactions carried out by travel agents which seeks to avoid the difficulties to which traders would be exposed by application of the normal principles of the Sixth Directive concerning transactions involving the supply of services bought in from third parties (see, to that effect, judgment of 6 July 2006, Kittel and Recolta Recycling , C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 42 and the case-law cited).", "paragraph_id": "para_70" }, { "text": "31       In the light of all the foregoing considerations, the answer to the first and second questions is that Article 26 of the Sixth Directive must be interpreted as applying to a situation in which a taxable person purchases tourist services from third parties, in particular transport services, in order to sell them in his or her own name to consumers in the form of excursions, where the fee received in that respect does not cover all the costs of those services and the remainder of those costs is financed by the revenue from the sale of goods that that taxable person offers to those consumers during those excursions.", "paragraph_id": "para_71" }, { "text": "The third question", "paragraph_id": "para_72" }, { "text": "32       By its third question, the referring court asks, in essence, whether the first sentence of Article 12(1) and the third sentence of Article 26(2) of the Sixth Directive must be interpreted as conferring on the taxable person a right to a refund of input VAT where the margin of a single supply is negative.", "paragraph_id": "para_73" }, { "text": "33       In that regard, it should be recalled that, under the first sentence of Article 12(1) of the Sixth Directive, the rate applicable to the taxable transactions is that in force when the chargeable event for tax occurs.", "paragraph_id": "para_74" }, { "text": "34       In accordance with Article 26(2) of the Sixth Directive, under the special scheme set out in Article 26, the taxable amount consists in the difference between the total amount to be paid by the traveller, exclusive of VAT, and the actual cost to the travel agent of supplies and services purchased from other taxable persons.", "paragraph_id": "para_75" }, { "text": "35       According to the case-law of the Court of Justice, that taxable amount must be calculated in accordance with that provision, by referring to each single service provided by the travel agent, not on an overall basis (see, to that effect, judgment of 26 September 2013, Commission v Spain , C‑189/11, EU:C:2013:587, paragraph 103).", "paragraph_id": "para_76" }, { "text": "36       In addition, in accordance with Article 26(4) of the Sixth Directive, VAT charged to the travel agent by other taxable persons on the transactions described in paragraph 2 of that Article 26 which are for the direct benefit of the traveller, are not to be eligible for deduction or refund in any Member State.", "paragraph_id": "para_77" }, { "text": "37       In that regard, as has been recalled, in essence, in paragraph 14 above, the objective of the special scheme provided for in Article 26 of the Sixth Directive is to simplify the rules relating to VAT applicable to travel agents. It also seeks a fair distribution of the revenue from the charging of that tax among the Member States, by ensuring, first, the attribution of the VAT revenue relating to each individual service to the Member State in which the final consumption of the service took place and, secondly, the attribution of that relating to the travel agent’s margin to the Member State in which the agent is established (judgment of 26 September 2013, Commission v Spain , C‑189/11, EU:C:2013:587, paragraph 59).", "paragraph_id": "para_78" }, { "text": "38       In the present case, it is apparent from the documents before the Court that the travel services offered by P were offered systematically at a loss, with the result that the margin, within the meaning of the third sentence of Article 26(2) of the Sixth Directive, is negative. It is common ground that that margin did not enable P to cover in full the input costs incurred on the purchase of transport services from third-party taxable persons.", "paragraph_id": "para_79" }, { "text": "39       However, it follows from the combined provisions of Article 26(2) and (4) of the Sixth Directive that that directive does not provide for any right to a refund of input VAT on which P could rely in respect of the input VAT that P paid when purchasing the transport services from third-party taxable persons.", "paragraph_id": "para_80" }, { "text": "40       That is merely the consequence of the conditions for application of Article 26 of the Sixth Directive. (see, by analogy, judgment of 8 February 2018, Commission v Germany , C‑380/16, EU:C:2018:76, paragraph 55).", "paragraph_id": "para_81" }, { "text": "41       In addition, as the European Commission has observed, if it were necessary to grant, in the event of a negative margin, a right to a refund of VAT by the Member State in which the travel agent is established, that Member State could be required, in the event of travel services provided within the territory of several Member States, to refund an amount corresponding to the VAT paid in another Member State. That would deprive of its substance the objective of the fair distribution of VAT revenues among the Member States by imposing on the Member State of establishment of the travel agent a budgetary burden corresponding to a tax imposed by another Member State. Such a result would be incompatible with the very purpose of the special scheme set out in Article 26 of the Sixth Directive, as recalled in paragraph 37 above.", "paragraph_id": "para_82" }, { "text": "42       Such a result would also conflict with the prohibition on calculating the margin as a whole, referred to in paragraph 35 above, since that would amount to allowing a set-off between the losses and the profits generated by the activity of a trader such as P. Moreover, it must be recalled that P freely chose its business model, with full knowledge of the structurally loss-making nature of the travel services it offers.", "paragraph_id": "para_83" }, { "text": "43       For all the foregoing reasons, the answer to the third question is that the first sentence of Article 12(1) and the third sentence of Article 26(2) of the Sixth Directive must be interpreted as not conferring on the taxable person any right to a refund of input VAT where the margin of a single supply is negative.", "paragraph_id": "para_84" }, { "text": "Costs", "paragraph_id": "para_85" }, { "text": "44       Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.", "paragraph_id": "para_86" }, { "text": "On those grounds, the Court (Second Chamber) hereby rules:", "paragraph_id": "para_87" }, { "text": "1.       Article 26 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment", "paragraph_id": "para_88" }, { "text": "must be interpreted as applying to a situation in which a taxable person purchases tourist services from third parties, in particular transport services, in order to sell them in his or her own name to consumers in the form of excursions, where the fee received in that respect does not cover all the costs of those services and the remainder of those costs is financed by the revenue from the sale of goods that that taxable person offers to those consumers during those excursions.", "paragraph_id": "para_89" }, { "text": "2.       The first sentence of Article 12(1) and the third sentence of Article 26(2) of the Directive 77/388", "paragraph_id": "para_90" }, { "text": "must be interpreted as not conferring on the taxable person any right to a refund of input value added tax where the margin of a single supply is negative.", "paragraph_id": "para_91" }, { "text": "[Signatures]", "paragraph_id": "para_92" }, { "text": "*       Language of the case: German.", "paragraph_id": "para_93" } ], "word_count": 5081, "cites": [ "C-308/96", "C-94/97", "C-200/04", "C-49/07", "C-89/23", "C-132/16", "C-380/16", "C-439/04", "C-440/04", "C-189/11" ], "cited_by": [], "sha256": "ea616367c330e7ce39f951d92572a7eb243ff963e09bea728f1717a9d62aaa96", "source_url": "https://publications.europa.eu/resource/celex/62024CJ0565", "fetched_at": "2026-09-29T04:22:36.427+00:00", "canonical": "https://legal.exploreworldai.com/ai/judgments/eu/c-565-24", "risk_graph": "https://legal.exploreworldai.com/api/public/v1/risk?id=eu:c-565-24", "relations_graph": "https://legal.exploreworldai.com/api/public/v1/relations?id=eu:c-565-24", "changes": "https://legal.exploreworldai.com/api/public/v1/eu-praxis/changes", "agent": "https://legal.exploreworldai.com/api/public/v1/eu-praxis/agent?id=eu:c-565-24" }, "hash": "sha256:11dbe83e2b66204e19849c2b8acc622bccf17a71783c9e851a451f21cd1f67ab", "version": "legal-2026-10-09", "expires": "2026-10-11T00:00:00.000Z", "dependency": { "index_version": "legal-2026-10-09+legal-2026-10-09+2026-10-09T21:48:48", "content_hash": "sha256:11dbe83e2b66204e19849c2b8acc622bccf17a71783c9e851a451f21cd1f67ab", "revalidate_after": "2026-10-10T07:35:49.126Z", "max_copy_age_seconds": 3600, "policy": "revalidate-required; attribution-preferred", "changelog": "https://legal.exploreworldai.com/api/public/v1/dependency", "verify": "https://legal.exploreworldai.com/api/public/v1/verify", "stale_copy_invalid": true }, "canonical": "https://legal.exploreworldai.com/api/public/v1/judgment-text?id=eu:c-565-24", "follow": [ { "rel": "risk", "href": "https://legal.exploreworldai.com/api/public/v1/risk?id=eu:c-565-24" }, { "rel": "relations", "href": "https://legal.exploreworldai.com/api/public/v1/relations?id=eu:c-565-24" }, { "rel": "agent", "href": "https://legal.exploreworldai.com/api/public/v1/eu-praxis/agent?id=eu:c-565-24" }, { "rel": "obligations", "href": "https://legal.exploreworldai.com/api/public/v1/obligation-chain" }, { "rel": "changes", "href": "https://legal.exploreworldai.com/api/public/v1/whats-new?jurisdiction=eu" } ], "disclaimer": "Source reference with official identifier. 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