Irish tour operators are in line for a windfall after the Revenue Commissioners conceded a 10-year battle over VAT.
Operators stand to receive as much as €20-€25 million, according Pascal Brennan, indirect tax partner at Deloitte.
The case dates back to the introduction of the EU Sixth Directive in 1979. Up to then tour operators had been allowed to claim VAT incurred in certain elements of their business while travel agents were not.
Following the transposition of the directive into Irish law, this distinction was lost.
"We argued that there had been a misinterpretation of the law when it was introduced," said Mr Brennan. "While travel agents are brokers or intermediaries selling other companies' products to customers, tour operators are principals, supplying package holidays outside the State.
"Revenue has now accepted that position."
The Revenue this week said that it was changing its approach on the VAT status of tour operators following a decision in principle by the Appeal Commissioner. Operators will be able to reclaim VAT incurred on transport and accommodation services supplied outside the State.
Tour operators who have not already indicated they intend to make a VAT claim as part of the Deloitte case or otherwise will be able to claim back only VAT incurred over the last four years. Those who have notified the Revenue of their claims can claim back further - in some cases 10 years.
"The final bill to Revenue could be between €20 million and €25 million, including retrospection," said Mr Brennan, who added that there would be an ongoing cost to Revenue from future VAT claims.
However, John Kinnane, president of the Irish Tour Operators' Federation, said the rebate to his members was more likely to be in the region of €10 million.
There is a prospect that Revenue could introduce the tour operators' margin scheme which already operates in most EU states. This scheme taxes the profit margin achieved by tour operators on travel within the EU.
"We would urge the Revenue not to do so," said Mr Brennan.
"They have the latitude to allow the status quo, and that could prove very attractive in persuading major international tour operators to locate their operations in Ireland."
