VAT rate on tour operators serving corporate clients up by 20%

The Value Added Tax rate on tour operators serving corporate customers in the country is being increased from 9% to 20%, according to a change in the VAT Act. The new texts stipulate that two different VAT rates will be levied on tourist service providers, depending on the type of their customers and the way the service is being offered. However, the increased levy will be borne by the tour operators alone, not by end users, explained officials from the Ministry of Finance (MoF) for Klassa daily. Regulations on the law application, which are prepared by MoF will specify the mechanism for implementation of the new law provisions. Ministry officials explained that the change in the VAT Act was introduced following recommendations from the European Commission aimed at ensuring a uniform approach.

Until April 2011, organised tourists paid a 7% VAT for their tourist packages and individual ones – 20%. On April 1, 2011, a single charge for both tourist types of 9% was introduced due to the suggestion of the European Commission.

The increased tax rate will be imposed on deals in which tour operators provide  packages to their clients not directly but through another travel agency.

"The raise in VAT will hit mainly corporate customers which have increased in number over recent years," said on this occasion for Klassa Rumen Draganov, Director of the Institute for Analysis and Assessments in Tourism. But he confirmed the information of MOF that the new VAT rate will not influence end users. "The increase will lower tour operators’ revenues. Tourist companies will be most affected because customers will prefer to go directly to the hotels, rather than rely on tour operators," said Draganov. Thus, companies in the industry will both pay the increased levy and lose customers.

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