Hospitality and Tourism Businesses
How do hospitality and tourism businesses manage VAT on bundled travel packages?
Hospitality and tourism businesses sell packages combining accommodation, meals, transport, and entertainment. Each component may attract different VAT rates. Tour operators in the EU apply the Tour Operators' Margin Scheme (TOMS), which simplifies VAT by applying it only to the margin earned on bought-in services. Business travel invoicing to corporate clients requires structured invoice formats for expense management and VAT reclaim.
How does the Tour Operators' Margin Scheme work?
TOMS is a mandatory EU VAT simplification for tour operators buying and reselling travel services:
- Scope: Applies to any business buying in and reselling travel, accommodation, and transport as principal
- VAT base: VAT applies to the margin between the buying-in cost and the selling price to the traveler
- Single rate: VAT charged at a single rate for the whole package; component breakdown not required
- No input VAT: Operator cannot recover input VAT on the bought-in travel services
- Invoice: Operator's invoice to customer shows total price; VAT is not shown separately
- Exclusions: In-house services (own hotel, own transport) are outside TOMS; taxed per normal rules
Frequently Asked Questions
- What VAT rate applies to hotel accommodation?
- Hotel accommodation VAT rates vary significantly: France applies 10 percent reduced rate; Germany applies 7 percent; UK applies 20 percent standard rate for commercial accommodation; UAE applies 5 percent; Ireland applies 9 percent for tourist accommodation. Businesses with hotels in multiple countries must configure rate tables per property. Temporary rate reductions (common post-COVID) require monitoring and updating.
- How do hotels issue VAT invoices for business guests?
- Business guests staying on company account require full VAT invoices showing room rate, VAT amount, and hotel's VAT registration number for expense claim and input VAT recovery purposes. Hotels should offer e-invoicing capability for corporate accounts in mandated jurisdictions. Online check-out systems can generate structured digital invoices automatically. For conferences, detailed invoices must distinguish between accommodation, catering, and room hire.