What is the Travel Agent VAT scheme?

Not every event falls under the Travel Agent VAT scheme. That's the good news. The bad news: it isn't always clear when it does apply.

The scheme applies when two conditions are met. The first: you buy travel services from third parties. Travel services are transport and accommodation: flights, trains, coaches, hotel rooms or other lodging. Catering, entertainment, venue hire and activities in principle do not count. Those are ordinary services and fall outside the Travel Agent VAT scheme. The second: you sell these travel services in your own name and for your own account as part of an overall package to the end client. Are you passing on costs purely as an agent or intermediary? Then the scheme doesn't apply. That applies when you act in the name and for the account of the client.

So when does it apply?

On an incentive trip to Lisbon where you buy flights and hotels and invoice everything from one hand to the client, the Travel Agent VAT scheme applies. At a conference in Berlin where you book delegate accommodation and include it in the total package, the scheme applies to the accommodation component. At a staff party in Amsterdam where you hire a venue, arrange entertainment and provide catering, but don't buy transport or accommodation, the Travel Agent VAT scheme doesn't apply.

In doubt whether your event falls under the scheme? Ask a tax adviser before you invoice. The Dutch tax authority has little patience for retroactive corrections.

Under the standard VAT system you charge 21% on your sales price. Simple and familiar. Under the Travel Agent VAT scheme it works differently.

VAT is calculated on the profit margin: margin = sales price to client minus purchase price of travel services from third parties. The VAT is included within the margin. The calculation is: VAT = margin × 21/121.

Worked example

Say: you're organising an incentive trip. You invoice the travel component (flights and hotels) to the client for €12,000. You have paid €9,000 to the airline and the hotel yourself. Margin: €3,000. VAT: €3,000 × 21/121 = €520.66. The client pays €12,000 including this VAT. But doesn't see the amount as a separate line on the invoice.

The non-travel part of the package consists of entertainment, programme and on-site management. You invoice that with standard VAT of 21% on the sales price. So you run two VAT calculations side by side: the margin scheme for the travel component, and the standard system for the rest.

This calls for clear administration. For each event you must be able to show which costs were bought in as "travel services from third parties". Keep invoices from carriers and accommodation providers carefully on file. This isn't something you reconstruct after the fact. The Dutch tax authority may ask for it.

This is where it goes wrong for many event agencies: the invoicing requirements under the Travel Agent VAT scheme deviate from the standard VAT invoice.

What's not allowed

Under the Travel Agent VAT scheme you cannot itemise VAT on the invoice. There is no amount, no percentage and no VAT line for the travel component. This is a legal requirement, not a choice.

What must appear

The invoice states the total price including VAT, with a reference to the Travel Agent VAT scheme. In practice you use fixed wording. For example: "The special scheme for travel agents applies to the travel services on this invoice (art. 28b Dutch VAT Act 1968). VAT is not separately stated." Your accountant can supply you with a standard clause that you use on every relevant invoice.

Consequences for the client

Business clients cannot reclaim the VAT on the travel component as input VAT. They pay VAT, but it's final for them. It isn't a pass-through. For B2C clients it makes no difference. For businesses that normally recover all VAT, it is a net cost increase. It's a small amount on a small incentive and a substantial amount on a large event.

You don't want this conversation after the invoice has gone out. Address the VAT treatment in the quote itself. Explain what it means for the client. Make sure there's no surprise when the invoice arrives. How to draft a transparent quote — read our piece on the pitch document →

The Travel Agent VAT scheme gets interesting at events outside the EU, sometimes even advantageous.

Services outside the EU: 0% VAT

If you buy travel services from suppliers outside the European Union, the zero rate (0% VAT) applies to those specific components. Are you organising an incentive to New York and booking the hotel directly with an American hotel? Then the VAT on the margin for that component is 0%. This makes the travel component for non-EU trips VAT-free.

EU travel services: standard margin scheme

Is it an incentive to Barcelona, a team trip to Berlin or a conference in Brussels? The flights and hotels you buy from European suppliers do fall under the margin scheme, at the standard VAT rate on the margin.

Always split your package

On mixed trips you split the travel components. For EU travel services the margin scheme applies with VAT on the margin. For non-EU travel services 0% VAT applies. This calls for accurate administration per supplier and per component. But it pays off: for large incentives to far-flung destinations the VAT advantage can be considerable.

Incentive trips are the classic application of the Travel Agent VAT scheme for event agencies. You buy flights, hotels and transfers from external parties, bundle them with an inspiring programme and invoice it as one package. It's precisely that package nature that makes the scheme applicable. And precisely why it matters to know this already in the planning phase.

More on organising an incentive trip? Read our piece →

The Travel Agent VAT scheme isn't complicated once you know it. But it asks for conscious choices. Right from drafting the quote.

Step 1: Map out your event. Which components do you buy from third parties? Distinguish between travel services (transport, accommodation) and other services (entertainment, catering, venue, programme). Only the travel services from third parties fall under the margin scheme.

Step 2: Calculate the margin per component. Know what you buy and what you invoice for the travel component. Record it in your administration. Not as an afterthought, but as a fixed routine for every event with travel services.

Step 3: Adjust the invoice wording. Use a fixed clause on invoices where the Travel Agent VAT scheme applies. Your accountant or tax adviser can supply you with standard text you reuse.

Step 4: Communicate proactively with clients. Tell business clients what the VAT consequences are for their own administration. They cannot reclaim the VAT on the travel component. That doesn't have to be an objection. But it must not be a surprise.

Live Impact organises incentives and travel packages where the Travel Agent VAT scheme may apply. We work with advisers who know the fiscal side and make sure quotes and invoices add up. Do you have an event where transport or accommodation form part of the package? We're happy to think along, including on the fiscal side.

Also read our piece on the travel expenses scheme for corporate events →

The Travel Agent VAT scheme isn't a fiscal oddity. It's a relevant scheme for every event agency that organises incentive trips, travel packages or events with combined travel and stay arrangements.

Those who know it can handle it deliberately: in the quote, on the invoice and in the administration. Those who don't know it run the risk of back-tax assessments, surprised clients and unnecessary disputes during a VAT audit.

This article gives you the framework. For the specific application to your situation: get professional tax advice. The subtleties of the Travel Agent VAT scheme call for an adviser who knows VAT law and the events industry.

Organising an event where travel services form part of the package? Get in touch via hello@live-impact.nl or via the contact form on our website. We respond within one working day.

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