Tax Administration announces directive on special VAT scheme for travel agencies
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The directive does not contain information in opposition to the recommendations suggested at the UHPA seminars. However, according to the director of UHPA, Mr. Željko Trezner, there are still some unanswered questions that keep resurfacing.
Tax Administration of the Ministry of Finance has announced today on their website an additional directive on the application of the special VAT scheme for travel agencies. We call to your attention that the announced directive does not include information in opposition to the suggestions provided at our seminars. Moreover, it includes more specific clarifications on some of the questions we raised regarding the application of the special VAT scheme. Unfortunately, some frequent questions have remained unanswered to this day, but we expect answers soon.
Monthly VAT calculation
How will the monthly calculation of VAT on advance payments and provided services included in the special VAT scheme be put into effect proves to be an extremely important, yet not clearly defined question. The directive and listed examples enable us to conclude that the calculation should be made for every travel package separately and for received advance payments based on the calculation of each package, i.e. tour separately, even though it is not explicitly stipulated in the directive. Literal implementation of this approach could make calculation more difficult and increase business expenses. Therefore, we call your attention on other models you can put into practice which will ensure that the eventual control of the VAT calculation on a matter by matter basis results in the same (or increased by the advance payments) amount of the calculated VAT.
In that regard, if you consistently apply the model of cumulative matching of revenues and allowable expenses according to the special VAT scheme for the provided services, recommended at our seminar, you should end up with the same value of the cumulative margin as when you sum up all the margin values for each travel package separately. As for the advance payments, you can calculate the VAT on advance payments by using the highest calculated margin .This way you do not have to calculate VAT by using the imputed margin (which differs from the highest calculated margin) for each travel package. Instead, you will assume that the same (highest) margin is valid for all of the received advance payments. Naturally, it is possible to divide the received advance payments into several groups according to the different products with approximate calculated margins and then apply the highest calculated margin model on each group. This way you will significantly simplify the VAT calculation on the received advance payments and you will not commit an infringement. In case of the control of the VAT calculation and the calculated margins of each travel package separately, the calculated VAT will not be any lesser than the one you ought to pay.
UHPA suggests simpler solutions
We hope that this will not be the final solution for the making of monthly VAT calculations according to the special VAT scheme given that we have suggested simpler solutions based on the experiences of other countries to the Tax Administration. We expect to receive a written response regarding our suggestions soon. In the meanwhile, we advise you to apply the solutions mentioned above.
Directive on the special VAT scheme for travel agencies according to the Value Added Tax Act (NN 73/13) is available here.