United States: Court Of Justice Of The European Union (CJEU) – Advocate General's Opinion

Ibero Tours GmbH – Case C-300/12

The Advocate General has issued his opinion in the above case on 18 July 2013. The opinion has not been issued in the English language and, as a result, this Case Alert has been based on an unofficial translation from French.

The case concerns whether the principle established in the earlier case of Elida Gibbs (Case C-317/94) – that retrospective discounts given by the supplier should reduce the value of a supply for VAT purposes by the amount of the discount – could apply in a case where a travel agent gave a discount to a traveller.

Ibero Tours GmbH (Ibero) is a travel agent and sells holidays on behalf of tour operators. In consideration of that supply, Ibero charges the tour operator a commission. In order to attract customers, Ibero financed a discount from the tour operator's price. Ibero argued that, as in Elida Gibbs, the amount of VAT that should be paid on its commission should be reduced to take account of the discount allowed to the customer.

The Advocate General has agreed with Ibero. In essence, the Elida Gibbs principles apply to such a scenario. If the taxable amount was not reduced by the value of the discount allowed, the tax authority would collect a greater amount of VAT on the sale of the package than had been paid by the final consumer. This would be contrary to the principle of fiscal neutrality. Elida Gibbs established in 1996 that the operation of the VAT system should not result in the tax authority receiving an amount of tax higher than that ultimately paid by the final consumer.

Comment – this opinion of the Advocate General is only the starting point in the resolution of this dispute. We await the judgment of the full Court. However, assuming that the Court agrees with the Advocate General, this will be big news for travel agents that offer similar discounts to customers. Indeed, it is likely to have much wider application to all situations where an agent offers a discount to the principal supplier's customer and finances the discount from any commission it receives. This opinion also falls quickly on the heels of a similar UK Case involving TUI Travel. If the full court agrees with the Advocate General, the decision in Tui Travel must surely be overturned.

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