TUI Belgium VAT Case: Standstill Clause Explained

Any transition from existing to newly established rules is challenging and introduces some uncertainty for taxable persons affected by legislative changes. On the surface, the dispute between TUI Belgium and nine other Travel4You companies on one side and Belgium government on the other seems like a technical dispute about how a few words were written in Belgian VAT legislation, or in this case, not written. 

However, a much bigger question lies beneath this language problem. A question that affects thousands of cross-border businesses. That question is: can a change in legal wording quietly unlock decades of VAT refunds, or does tax liability survive even when explicit statutory language disappears?

Background of the Case 

Even though TUI Belgium organized travel arrangements in its own name, it relied on third-party providers, such as hotels and airlines, to deliver the actual services. After a legal change introduced by a 1999 Royal Decree effective from January 1, 2000, the third-party providers believed that services relating to destinations outside the EU should have been exempt from VAT. As a result of this interpretation, they requested refunds for VAT paid over a long period, from November 2004 to December 2014.

The Belgium Tax Authority denied those refund requests, resulting in an appeal before the Court of First Instance, which, in January 2020, ruled that they were not entitled to a VAT refund on those travel services. The Court of Appeal confirmed this in the 2022 judgment. 

The Court of Appeal determined that Belgium had relied on a special legal mechanism known as a “standstill clause,” found in both the Sixth Directive and the EU VAT Directive. Under this mechanism, EU countries may continue applying VAT to certain transactions if they were already taxing them before January 1, 1978.

Additionally, the Court of Appeal noted that rules adopted in 1999, which came into effect in 2000, did not introduce an exemption but rather aligned national law with EU rules by treating travel agents as acting in their own name, rather than as intermediaries acting on behalf of the traveler. By doing so, Belgium addressed concerns raised by the European Commission about potential double taxation under the previous system, without eliminating VAT on those services.

Such a conclusion by the Court of Appeal led to an appeal before Belgium’s highest court, the Court of Cassation. TUI Belgium, together with other parties, argued that the Court of Appeal misinterpreted the law and that since January 2000, Belgian legislation no longer contains a clear and explicit rule allowing VAT to be charged on travel services for trips outside the EU. 

Also, the appellants stated that once Belgium removed the specific provision that had explicitly excluded such services from VAT exemption, there was no longer any legal basis to continue taxing them. Simply put, since there was no clear derogation in national law, Belgium could not continue applying VAT without breaching EU rules. The Court of Cassation acknowledged the existence of legal uncertainty and stated that this issue was not clarified by existing ECJ case law.

Main Questions from Request For Ruling

Faced with legal uncertainty, the Court of Cassation raised two closely related questions regarding the interpretation of the standstill clause in EU VAT law under both the Sixth Directive and the EU VAT Directive. With the first question, the Court of Cassation asked whether EU countries must have a clear and explicit provision in their national law that departs from the VAT exemption for travel services outside the EU to rely on the standstill clause and continue taxing those services.

The second question asks whether a legislative change, such as the 1999 Belgian law, in which the explicit rule making these services taxable was removed and replaced with provisions that only imply their taxability, can still be considered essentially the same as the previous system.

Applicable EU VAT Directive Article

Given the nature and timeframe of the case, the ECJ analyzed and interpreted provisions from both the Sixth Directive and the EU VAT Directive. Regarding the Sixth Directive, the provisions in Articles 26, on the special scheme for travel agents, and 28, on transitional provisions, were key to this case. 

On the other hand, Articles 153, 306 to 310, and 370 of the EU VAT Directive were identified as the most relevant. Additionally, Annex X to the EU VAT Directive, Part A, which sets out a list of transactions that EU countries may continue to tax under a transitional “standstill” regime, including travel agent services, was considered.

Belgium National VAT Rules

Regarding Belgian law, the ECJ noted that, between 1977 and 1999, the Belgian VAT Law contained detailed rules governing the treatment of travel agents for VAT purposes. Notably, Articles 20(2) and Article 41(2) defined these rules. However, in January 2000, the legal framework changed, and the earlier distinction that treated travel agents as intermediaries in certain situations was removed. The services provided by travel agents relating to travel outside the EU were no longer classified as intermediaries, but they remained subject to VAT.

Importance of the Case for Taxable Persons

The raised questions and ECJ ruling have several implications for taxable persons, primarily travel agents, hotels, intermediaries, and other operators in the tourism industry. Some of the key matters addressed in this case include refund limits, removing legal uncertainty arising from technical changes to national legislation, and how restructuring or simplifying VAT laws affects exemptions and refund opportunities for taxable persons.

Analysis of the Court Findings

At the beginning of the analysis, the ECJ recalled that under the general system of the Sixth Directive and the EU VAT Directive, travel services are normally exempt from VAT when the underlying transactions performed by other providers take place outside the EU. In such cases, travel agents are treated as intermediaries, and their activity is generally exempt. 

Nonetheless, the Sixth Directive introduced a transitional derogation mechanism that allows EU countries to temporarily maintain taxation on certain transactions that would otherwise be exempt. The derogation from the general rule includes, among others, services provided by travel agents for journeys outside the EU. 

The same rules apply in the current EU VAT framework, where Article 370 of the EU VAT Directive reproduces the substance of Article 28(3) of the Sixth Directive. More specifically, the EU VAT Directive allows EU countries to keep taxing certain transactions that were already being taxed since 1978, even if those transactions would otherwise be exempt under the general VAT rules. This includes services provided by travel agents acting in their own name for journeys outside the EU.

Notably, the ECJ underlined that nothing in the wording of the two articles requires EU countries to adopt an explicit national provision establishing a formal derogation from the VAT exemption. Therefore, when EU countries practice this right, they are free to choose how they implement it in their national legal systems. 

However, this right has its limits. Under the general principle of legal certainty, national rules must be clear, precise, and predictable so that taxable persons can understand their VAT obligations. In other words, while EU countries have flexibility in structuring their legislation, the result must clearly indicate which transactions are taxable and under what conditions.

In the present case, the ECJ determined that Belgium had already been taxing the supply of travel agency services for journeys outside the EU since December 1, 1977, and that, after the 1999 reform, the Belgian VAT Law continued to treat those services as subject to VAT. Despite the legislation no longer containing an explicit rule stating that such services were taxable, their taxability remained in effect through provisions that implicitly excluded them from the exemption.

In further addressing Belgium’s 2000 legal changes and the standstill clause, the ECJ stated that the mere fact that national legislation is amended after the relevant reference date does not, in itself, exclude it from the scope of the derogation. The critical point is whether the new rules are essentially the same in their core structure and effect as the earlier legislation.

Therefore, if the amendments merely continue the existing tax treatment or remove technical obstacles, they can still fall within the permitted derogation. In contrast, if the new legislation introduces a different conceptual approach or establishes a substantially new system, it cannot be treated as a continuation of the earlier regime and falls outside the standstill exception.

Before the 1999 Belgium reform, travel agents were generally presumed to act as intermediaries on behalf of travelers when arranging services such as transport, accommodation, or catering. Since January 2000, the previous statutory presumption of agency has been removed, and travel agents have been held to be acting in their own name when they organize and sell travel packages using services purchased from third parties. 

Consequently, the specific provision excluding travel agents from the general exemption for brokers and agents was deleted as unnecessary. Nonetheless, as the ECJ noted, the practical outcome remained the same: travel agents’ services for travel outside the EU continued to be subject to VAT. 

Courts Final Decision

The ECJ concluded that EU rules, including both the Sixth VAT Directive and the VAT Directive, do not require EU countries to have an explicit national law that clearly and expressly states a derogation from the VAT exemption for travel agency services relating to journeys outside the EU. Merely maintaining the taxation of those services under the conditions permitted by the standstill clause, without changes of the substance, is sufficient.

Furthemore, the ECJ held that a legislative reform that removes an explicit provision imposing VAT on such services and replaces it with a system in which taxation follows only implicitly does not automatically mean that the national legislation has changed its essential nature. Such a change is not, in itself, considered to depart from the previous regime or to introduce a fundamentally different approach, if the practical result remains the same and the overall structure of taxation remains unchanged.

Conclusion

With its decision, the ECJ drew a clear line between form and substance in VAT rules and regulations. While legislative wording is important when changing rules, what ultimately matters is whether the economic reality of taxation has truly shifted. The final note for taxable persons and tax professionals is that legal certainty does not depend on explicit phrasing alone, but on the continuity of the tax system itself. 

Source: Case T‑221/25 - TUI Belgium and by Travel4You v Belgian State, Sixth Directive, EU VAT Directive