The article examines the Tour Operators’ Margin Scheme (TOMS), highlighting its intended simplification for travel agents and the significant challenges it poses, such as blocked input VAT and inconsistent application across EU Member States. It discusses the scheme’s impact on profitability, competitive distortions, and the European Commission’s public consultation on reforms launched in 2025.
Maltese operators cannot recover input VAT on purchases such as French hotel stays, turning that VAT into a cost that can reduce profitability.
The European Commission launched the consultation between July 2025 and October 2025.
The 2017 EU TOMS Study estimated that blocked input VAT on direct costs amounts to about €1.15 billion per year.
The margin is taxed at the standard VAT rate, regardless of the individual rates applied to the travel services within the package.
EU operators face VAT recovery barriers due to blocked input VAT, while non‑EU operators are not subject to TOMS and therefore do not face these barriers, creating competitive distortions.
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