# CJEU on Margin Taxation for Promotional Coffee Trips > The CJEU clarifies when coffee trips are subject to margin taxation and why a negative margin does not create an input VAT refund claim. Source: https://www.mtrlegal.com/en/cjeu-margin-taxation-coffee-trips/ · Language: en · Updated: 2026-10-22 --- ## CJEU on margin taxation for so-called coffee trips By judgment of 10 September 2026 in [Case C-565/24](https://eur-lex.europa.eu/./legal-content/AUTO/?uri=CELEX:62024CJ0565), the Court of Justice of the European Union (CJEU) ruled that the [special scheme for travel agents](https://www.mtrlegal.com/eugh-bestaetigt-margenbesteuerung-bei-kaffeefahrten-trotz-verlusten/) under Article 26 of the Sixth Directive 77/388/EEC can also apply to certain excursions organised by a trader away from its business premises in order to promote the sale of goods. In legal literature, the proceedings are referred to as “P-GmbH & Co. KG (Voyages-café)”. The decision concerned a dispute between a German company that organised tourist excursions and a German tax office. At its core was the [VAT treatment of trips](https://www.mtrlegal.com/wiki/umsatzsteuer/) in which the consideration collected did not fully cover the purchased transport services and the remaining costs were financed through proceeds from sales of goods during the trips. ## Main proceedings before the German tax courts ### Excursions to promote the sale of goods In the years 1997 to 1999, the claimant organised excursions commonly referred to in Germany as “Kaffeefahrten” (“coffee trips”). Participants were transported by coach to tourist destinations. There they received catering and could take part in an additional tourist programme. At the same time, the participants were invited to sales events at which the claimant offered various goods. There was no obligation to purchase these goods. For VAT purposes, the sales of goods had to be distinguished from the transport services for which the participants paid a fee. The claimant purchased the transport services from other taxable persons and offered them to the participants in its own name. However, the fare paid by the participants did not fully cover the costs of the purchased transport services. The uncovered portion and further costs were financed through proceeds from the sale of goods. For the tax year in dispute, 1999, a cost coverage ratio of approximately 60 percent is mentioned. ### Dispute over input VAT deduction The claimant initially treated its activity under the general VAT rules and claimed in full the input VAT attributable to the services it had received. This was initially not objected to by the tax authorities. Following tax audits and subsequent administrative and court proceedings, the tax office recognised the input VAT deduction from the coach costs only to the extent that the transport services related to trips for which no fee was charged to the participants. In the case of excursions for consideration, the tax authorities took the view that the special scheme for travel agents was applicable and that, as a result, the input VAT deduction for travel input services was excluded. The Niedersächsisches Finanzgericht (Lower Saxony Tax Court) confirmed this view by judgment of 12 May 2022. The claimant filed an appeal on points of law with the Bundesfinanzhof (BFH, Federal Fiscal Court). The proceedings were already in their second round before the Bundesfinanzhof; in the first round, the Bundesfinanzhof had previously ruled on the coffee trips for the tax years in dispute by judgment of 13 December 2018, V R 52/17. The request by the Bundesfinanzhof to the Court of Justice of the European Union was made in [proceedings V R 30/23](https://www.bundesfinanzhof.de/en/entscheidungen/entscheidungen-online/decision-detail/STRE202410146/) by order of 20 June 2024 and was officially published in BStBl II 2024, 750 (Bundessteuerblatt Part II, German Federal Tax Gazette). The order was announced on 22 August 2024. ## Legal framework of the decision ### Special scheme for travel agents under Article 26 of the Sixth Directive Article 26 of the Sixth Directive 77/388/EEC provided for special VAT treatment for travel agents. The provision applied where travel agents acted in their own name vis-à-vis travellers and used supplies of goods or services provided by other taxable persons for the purpose of carrying out the travel. To that extent, tour operators were also regarded as travel agents. Under Article 26(2) of the Sixth Directive, transactions performed in connection with carrying out travel are treated as a single service supplied to the traveller. The taxable amount is the travel agent’s margin. This is calculated as the difference between the total amount payable by the traveller, excluding VAT, and the actual costs of supplies of goods and services received from other taxable persons, insofar as these directly benefit the traveller. Article 26(4) of the Sixth Directive excludes the deduction of input VAT or the refund of tax for these received services insofar as the services directly benefit the traveller. ### German VAT law Under German law, the corresponding provision was contained in § 25 Umsatzsteuergesetz (UStG, German VAT Act) in the version applicable to the main proceedings. Under that provision, special rules applied to travel services supplied by a trader that were not intended for the recipient’s business, insofar as the trader acted in its own name and used travel input services. The taxable amount was determined by the difference between the amount paid by the recipient of the service and the amount incurred by the trader for the travel input services. The input VAT deduction was excluded for separately invoiced tax amounts relating to travel input services. ## Questions referred by the Bundesfinanzhof to the CJEU ### Classification of the excursions The Bundesfinanzhof initially sought to know whether an excursion organised by a trader away from its business premises within the meaning of Directive 85/577/EEC may fall within the transactions performed by a travel agent in carrying out travel within the meaning of the first sentence of Article 26(2) of the Sixth Directive. The first question thus expressly referred to the concept of an excursion organised away from business premises in the first indent of Article 1(1) of Directive 85/577/EEC. ### Significance of a negative margin The Bundesfinanzhof further had to consider whether the special scheme for travel agents also applies where the margin relevant under the third sentence of Article 26(2) of the Sixth Directive is negative. This was relevant in the main proceedings because the actual costs of the purchased transport services exceeded the fees paid by the participants. Finally, the Bundesfinanzhof sought to know whether the first sentence of Article 12(1) of the Sixth Directive in conjunction with the third sentence of Article 26(2) of the Sixth Directive can lead to a refund to the taxable person in the case of a negative margin. ## CJEU decision on the applicability of the special scheme ### No restriction to traditional travel agents The CJEU clarified that Article 26 of the Sixth Directive applies not only to traders that formally act as travel agents or tour operators. Rather, the decisive factor is whether the trader acts in its own name and uses travel-related services supplied by other taxable persons to carry out the travel. The Court thereby followed its previous case law. According to that case law, the special scheme may also cover other economic operators if they carry out transactions that are identical or at least comparable to those of travel agents or tour operators. According to the judgment, the following are particularly relevant for the application of the scheme: - the trader acts in its own name vis-à-vis the travellers, - it receives services from other taxable persons, - those services directly benefit the travellers, - the travel service is not merely ancillary to another principal service. ### The travel character of the coach excursions remained intact According to the findings in the main proceedings, the services in dispute were coach excursions with a tourist element. The transport services were obtained from other taxable persons and passed on by the claimant to the participants in its own name. The Court regarded these as transactions that may be comparable to services supplied by travel agents or tour operators. The fact that the excursions served to promote sales of goods did not alter this assessment. From the participants’ perspective, the coach trip had an independent purpose. It was not merely a means of enabling the sale of goods under optimal conditions. A key factor was also that the participants were not obliged to purchase goods during the sales events. ## Relationship between travel service and sale of goods ### Not merely ancillary to the sale of goods The CJEU examined whether the transport service could be merely ancillary to the sale of goods. According to the case law, an ancillary service exists in particular where it has no independent purpose for customers but merely serves to enable them to benefit from the principal service under better conditions. The Court rejected this in relation to the excursions in dispute. The participants could make use of the trip, including the tourist programme, without purchasing goods. Accordingly, the coach excursion could have an independent purpose for customers. Moreover, the income from the travel services was not merely insignificant in relation to the sales of goods. The fee charged for transport covered, on average, a substantial part of the costs, approximately 60 percent in the tax year in dispute, 1999. ### Financing through sales of goods irrelevant The CJEU held that the special scheme for travel agents is also applicable where the consideration paid by the participants does not cover all the costs of the purchased transport services and the remaining share of the costs is financed through proceeds from sales of goods during the trips. The Court thereby clarified that a systematically negative margin does not preclude the application of Article 26 of the Sixth Directive. The purpose of the excursions, namely to promote sales of the goods offered, does not mean that the travel service falls outside the scope of the special scheme. Advocate General Szpunar had proposed in his Opinion that the special scheme for travel agents should not be applied in the main proceedings. The Court did not follow that proposal. ## No refund claim in the case of a negative margin ### Input VAT deduction remains excluded under Article 26(4) On the third question, the CJEU held that the first sentence of Article 12(1) and the third sentence of Article 26(2) of the Sixth Directive do not confer on the taxable person any entitlement to a refund of input VAT where the margin achieved on the single travel service is negative. The Court referred to Article 26(4) of the Sixth Directive, which excludes the deduction of input VAT or the refund of taxes charged to the travel agent by other taxable persons for transactions that directly benefit the traveller. The negative margin therefore does not entitle the taxable person to claim a refund of the input VAT paid when purchasing the travel input services. ### Purpose of the special scheme The CJEU also based this on the purpose of the special scheme. That scheme is intended to simplify the VAT treatment of travel services while also distributing VAT revenue fairly among the Member States. In the case of cross-border travel services, a refund claim in the Member State in which the travel operator is established could result in that Member State having to refund tax amounts collected in another Member State. In the Court’s view, this would be incompatible with the objective of a fair distribution of VAT revenue. In addition, a refund in the case of a negative margin would ultimately allow losses and profits to be offset against one another. According to the judgment, this would contradict the requirement that the margin be determined for each single service and may not be offset on a flat-rate basis across activities. ## Key points of the judgment For the VAT treatment of the excursions in dispute, the CJEU essentially held the following: - Article 26 of the Sixth Directive may also apply to traders that do not act as traditional travel agents. - An excursion offered in a trader’s own name may constitute a travel service within the meaning of the special scheme. - The travel character is not lost merely because the trip serves to promote the sale of goods. - There was no purchase obligation for the participants in the main proceedings. - The special scheme also applies where the participant fee does not fully cover the purchased transport services. - A negative margin does not create an entitlement to a refund of input VAT on the travel input services. ## Significance for VAT classification The decision makes clear that the formal classification of the trader alone is not decisive for the application of margin taxation. What matters is the specific structure of the service. If travel services are provided in the trader’s own name using services supplied by other taxable persons and if those services have an independent purpose for the participants, the special scheme may apply. The judgment concerns a particular set of facts from the tax years in dispute, 1997 to 1999. Nevertheless, it is significant for the classification of bundles of services in which travel or transport elements are combined with other commercial objectives, in particular sales of goods. In addition to the issue of margin taxation, the main proceedings also involved a dispute as to whether the reduced tax rate applies to the sale of so-called Q10 ampoules as food supplements. A parallel proceeding concerning the Finanzgericht (Tax Court) judgment was also pending before the Bundesfinanzhof under case reference V R 29/23. ## Tax law advice from MTR Legal The CJEU’s decision shows that the VAT treatment of composite supplies depends on a careful classification of the individual service elements. This applies in particular to travel services, margin taxation and the deduction of input VAT for purchased input services. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth private individuals on tax law as well as at the interfaces with commercial, corporate and distribution law. If you have legal questions concerning the VAT treatment of travel services and comparable service models, you can find further information at [Legal advice in tax law](https://www.mtrlegal.com/rechtsberatung/steuerrecht/).