The EU launches a public consultation on reforming the VAT regime for travel services – Aiming to boost competition and align with the Union’s digital and green goals
The European policy on Value Added Tax (VAT) applied to the tourism and travel sector is entering a reform phase, as the European Commission launches a public consultation aimed at modernizing and correcting distortions in the single market. The initiative, officially launched in July, invites businesses, public authorities, and citizens to submit their views by October 26, 2025, through the EU’s “Have Your Say” platform.
The reform focuses on two key areas: firstly, the existing “margin tax” system applied to travel agents, and secondly, the method of taxing passenger transport within the EU. Current rules are considered outdated and disproportionately burdensome for small businesses, while also posing risks of unfair competition between providers inside and outside the EU.
The Margin Tax Regime and Market Distortions
Currently, travel agents within the EU are subject to the special “Tour Operators Margin Scheme” (TOMS), under which VAT is not calculated on the total cost of travel services they purchase and resell, but only on the profit margin they earn. This system applies only to providers based within the EU, which – according to the Commission – leads to “inconsistencies and unfair advantages for non-European providers.”
The UK’s withdrawal from the EU (Brexit) has made these imbalances more evident, as travel agents based in the UK are no longer subject to the margin tax regime, gaining a competitive advantage over their EU-based counterparts.
TOMS Study Relaunched and Legislative Proposal in 2026
The Commission plans to reopen the discussion that had stalled in recent years, drawing on the “EU TOMS Study 2022,” and aims to submit a legislative proposal by the end of 2026. This is a significant development, as the absence of a unified EU approach has so far complicated business operations and created market inequalities.
Germany has already expressed support for a “dual EU model,” which would allow an opt-out from the margin tax for certain activities – especially in the B2B travel sector (e.g. business conferences, corporate travel), enabling input VAT deductions.
Taxation of Passenger Transport: Another Sticking Point
The second major aspect of the consultation involves the taxation of passenger transport. Currently, VAT is calculated based on the distance traveled within the EU. According to the Commission, this model disproportionately affects small providers operating solely within the EU and creates inequalities between different modes of transport. The tax treatment of aviation fuel is also on the table – a politically sensitive issue in view of the EU’s climate goals.
A Key Sector for the European Economy
The Commission highlights the importance of tourism for the European economy, as the sector represents around 10% of EU GDP and employs millions of people, mainly in small and medium-sized enterprises. Modernizing the tax framework is seen as crucial for ensuring fair competition, reducing bureaucracy, and aligning with the Union’s digital and environmental priorities.
Open Consultation: What It Involves
The consultation will last 12 weeks, until October 26, 2025. All interested parties – businesses, citizens, associations, and public bodies – can participate via the official EU platform by answering questionnaires or submitting documented opinions and proposals. Targeted meetings with industry representatives are also scheduled.
What’s at Stake for Greek Tourism
This development is particularly significant for Greece, where the tourism sector is a key pillar of the economy. Potential changes to the VAT regime – especially regarding input VAT deduction and leveling the playing field with non-EU providers – could directly affect travel agencies, tour operators, and transport providers. Greek professional associations are urged to respond promptly to defend the sector’s interests at the EU level.
The reform of VAT in travel services is a necessary but complex balancing act for the EU. In light of changes in the global tourism landscape, competition from third countries, and ambitious green strategies, the new framework must be simple, fair, and functional. The way it is designed and implemented will largely determine the competitiveness of European – and by extension Greek – tourism in the coming years.
