European Union’s new VAT rules set to increase online travel booking costs | Personal Finance | Finance
After European Union member states reportedly lost €93billion (around £81.2billion) in Value Added Tax (VAT) revenues in 2020, the European Commission has proposed a series of measures to modernise and improve the European Union’s VAT system. However, the major changes may see online travel booking costs increase when they come into effect.
Speaking on the proposed new laws applicable to the platform economy which sells travel-related services, such as short-term accommodation rentals, the European Commission’s statement in early December reads: “Under the new rules, platform economy operators in those sectors will become responsible for collecting and remitting VAT to tax authorities when service providers do not, for example, because they are a small business or individual provider.
“Together with other clarifications, this will ensure a uniform approach across all member states and contribute to a more level playing field between online and traditional short-term accommodation and transport services.”
It went on to explain how the new rules would “make life easier” for SMEs who would otherwise need to “understand and comply” with the VAT rules in all Member States where they do business.
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“Ultimately this will lead to higher prices for consumers who are already facing a cost of living crisis as costs across the supply chain are set to increase.”
According to Mr Wright, the technology providers that operate the booking platforms will also face considerable challenges from this announcement.
He said: “They can expect significantly increased administration costs if they are processing the transactions, which are now subject to VAT or increased VAT, where it was previously not collected.”
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However, he notes: “The fact that the EU believes these changes could capture an additional €6billion (around £5.2billion) euros per annum once they come into effect demonstrates the significance of today’s announcement.”
The exact implementation date for the changes is yet to be agreed by the member states.
Express.co.uk has contacted Airbnb and Booking.com for comment.
