The purpose of this thesis is to compile a guide book for the client Tilitoimisto Oy, concerning the value added tax (VAT) margin scheme in the travel industry. Changes to legislation in 2013 extend application of the VAT margin scheme to the travel industry, under certain conditions. Therefore, the subject is relatively new, and professionally written guidelines for treatment of travel services under the VAT margin scheme are still uncommon. Also, theses related to the subject are scarce. A great deal of the existing guidelines are scattered in various laws and directives, which causes inconvenience in acquiring a comprehensive view of the subject.

The difference between marginal taxation policy and the ordinary VAT policy is that under the VAT margin scheme, the seller pays the tax from their sales margin. The VAT margin scheme can be applied in certain circumstances to take into account the VAT hidden in the purchase price of a second hand merchandise.

Complying with the VAT margin scheme in the sale of travel agency services is compulsory when specific requirements are met. One important requirement is that the agent meets the definition of a tour operator stated in the Value Added Tax Act. This thesis will provide some practical examples on situations in which an agent should or should not be classified as a tour operator. Another notable issue is differentiating travel agency services as defined in the Value Added Tax Act.

The thesis will present exemplifying cases regarding calculation of the marginal tax. When performing these calculations, it is important to separate travel agency services from the services provided by the agent themselves, and to take into account possible discounts given to the end customer. Aim of the thesis is to map out the prerequisites for the treatment of firms under the VAT margin scheme, and to create comprehensive examples of the related calculations. The thesis will cover only the aspects of marginal taxation that relate to tour operators and travel agencies. A qualitative research method is utilized in the thesis. Sources used in writing the thesis include different laws and directives concerning marginal taxation and travel industry, and other professional literature.