EUROPEAN COMMISSION
DIRECTORATE GENERAL
TAXATION AND CUSTOMS UNION
TAX POLICY
VAT and other turnover taxes
TAXUD-EN
Consultation Paper
on modernising the Value Added Tax treatment of
vouchers and related issues.
Note
This paper is intended as a basis for open consultation of all parties interested in the
VAT treatment of vouchers. It also looks at some other closely related issues.
The sole purpose of the consultation exercise is to generate feedback on VAT
problems in these areas and on options for changing the existing provisions in the
Sixth VAT Directive. Such input from stakeholders can assist the Commission in
developing its thinking on the subject.
The contents of this document should not be seen as reflecting the views of the
Commission of the European Communities, nor does it signify that the Commission
is committed to any legislative initiative in this area.
The examples used to explain perceived problems are purely illustrative in nature.
Comments are invited on this paper by 12 January 2007 at the latest.
Submissions may be made in writing to
European Commission
Directorate-General Taxation and Customs Union
VAT and other turnover taxes unit
B-1049 Brussels
Belgium
or by e-mail to taxud-vat-vouchers@ec.europa.eu
or by fax to +32-2-299-36-48
If for any reason you wish that your comments remain confidential, please make this
clear. Otherwise we will assume that you have no objection to their eventual posting on
our website.
Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.
Office: MO59. Telephone: direct line (32-2) 2955124. Fax: (32-2) 2993648.
1.
INTRODUCTION
1.1.
Context
Both tax administrations and businesses are increasingly confronted with the question of
how properly to apply existing VAT rules to vouchers. Although several European Court
of Justice cases1 have provided useful guidance on the matter, there is a common feeling
that the current rules are not adapted to the reality of commercial and technical
developments and that the principles stated by the Court are difficult to put in practice.
Inconsistencies in the VAT treatment of vouchers between Member States can cause
double or non-taxation of cross-border transactions and provides opportunities for tax
avoidance.
Moreover vouchers continue to evolve in their scope, in some cases taking a role
indistinguishable from a general payment vehicle. This also needs to be addressed at
Community level.
In July 2000, in its programme for VAT2, the Commission included as a future priority a
review of the application of the Sixth VAT Directive to vouchers. In the review and
update of the VAT strategy priorities of October 20033 this was reaffirmed.
1.2.
Objective
This paper lists the main problems identified in the VAT treatment of vouchers and
related areas which can be attributed to outdated provisions or inconsistency in
interpretation of current rules. It also gives an overview of some options for changes. The
views of stakeholders are being sought in order to provide the Commission with
informed views on this subject and to help it to take forward future work.
1.3.
Consultation Target Group
This paper will be of interest to, inter alia, companies who issue or deal in vouchers of
all kinds, to businesses operating or using payment systems as well as their advisors.
2.
BACKGROUND
Recently there has been an increase in the use of vouchers and in their variety.
These include cash back (money refunds), money off (discounts) as well as gift vouchers
(which allow the supply free of charge of goods or services). The VAT treatment of these
vouchers would not be problematic if they only involve a simple reduction of the taxable
amount of a direct sale between a retailer and a final customer. However, when the
redemption process is supported by a manufacturer or distributor, this can cause
particular VAT problems.
The correct VAT treatment of these schemes under the current rules of the Sixth VAT
Directive, has been addressed in several ECJ judgements. Although they provided
1 Such as. Boots (C-126/88), Argos (C-288/94), Elida Gibbs (C-317/94), Kuwait Petroleum (C-48/97),
Commission vs. Germany (C-427/98), Yorkshire (C-398/99), Bupa Hospitals (C-419/02).
2 COM(2000) 348 final, Communication from the Commission to the Council and the European
Parliament "A strategy to improve the operation of the VAT system within the context of the internal
market".
3 COM(2003) 614 final, Communication from the Commission to the Council, the European Parliament
and the European Economic and Social Committee "Review and update of VAT strategy priorities"
2
clarification in the interpretation of the law, they also cause implementation problems for
tax administrations, particularly where issues arise linked to cross border trade.
The range of problems has increased through the growing use of vouchers in the
telecommunications and other industries: for instance in a number of Member States
some telephone card systems (mainly mobile phone cards) entitle the purchaser not only
to buy telecommunication services but also a range of other goods or services. VAT
issues arise through the convergence of these vouchers with payment instruments which
are subject to specific VAT treatment (exempt or out of scope operations).
VAT issues related to vouchers have been frequently discussed on several occasions
between the Commission and Member States but a workable common interpretation
proved difficult to find. Clearly the current treatment of vouchers across the Community
differs widely.
Some Member States treat the supply of a voucher as a supply of goods or services and
others treat its purchase as a payment on account for future supplies. Other Member
States do neither of the above, taxing instead the supply of goods or services that occurs
at the redemption of the voucher.
The present situation reflects ad hoc approaches by individual Member States when
faced with situations which are not specifically provided for in the Sixth Directive,
leading inevitably to mis-matches in taxation.
This happens, for example, when a mobile telephone card is traded between a country
which taxes the voucher as a payment on account and another one which taxes the
telecommunication service when the service is supplied. Both countries will legitimately
levy VAT causing involuntary double taxation. The converse situation would, all things
being equal, lead to tax loss because nobody will levy VAT.
The evolution of some voucher based systems brings them increasingly close in terms of
functionality to established payment systems as credit card, prepaid card, electronic
purse etc. . The lack of clear rules here contributes to inconsistent VAT treatment.
In order to advance a resolution of these issues, the Commission will consider possible
legislative proposals for new rules. Any change should respect the following principles:
•
The system must be able to cope with supplies in more than one country and with
vouchers issued in one Members State and redeemed in other Member States.
•
Tax neutrality should be ensured between different payment systems which
deliver the same result in paying for goods and services; that is, the choice of
payment instrument should not be a determining factor and the same tax charge
would apply to a supply whether the customer uses cash, a voucher or any other
form of consideration.
•
Tax administrations must be able to enforce the system effectively without
creating disproportionate burdens for business, that means simple and practical
rules.
•
The system reasonably be able to cope with future developments in the areas
under review.
3
3.
DEFINITION AND MAIN DESCRIPTION OF VOUCHERS4
The first step is to understand the main features of vouchers and how they function. Not
all types of vouchers circulate in all Member States and the use of particular types may
be quite recent in some cases. Moreover, vouchers can take different forms. An obvious
starting point would be to reach some level of agreement on what constitutes a "voucher"
to ensure consistency throughout the Community. It would also clarify when an
instrument is not a voucher.
At this point, it would seem to the Commission that for VAT purposes and according to
their functionalities, vouchers can logically be either multi or single purpose, i.e., they
carry a right to one type of goods or service or multiple types of goods and/or services.
Discount vouchers would form another category.
Voucher (general definition)
In general terms, a voucher, whatever the medium, could be a ticket, a token, a card, an
electronic message on a chip or other medium, generally accessed by a P.I.N., which
carries a right to receive goods or services, or to obtain a discount, when acquiring those
goods or services, or to receive a refund, at the time of the redemption. That right might
be shown as a value expressed in terms of monetary value or of percentage (percentage
reduction) or of units or of quantity.
This concept of voucher would in any case exclude the voucher from categorisation as
legal tender.
3.1.
Free voucher
A free voucher is one which is issued without charge, normally with the intention of
promoting a product or service. It can often be found in newspaper inserts or sent by
direct mail or simply given by businesses to their customers. Following the results of the
ECJ Case C-48/97, Kuwait Petroleum (GB) Ltd v Customs and Excise Commissioners,
the relevant test to determine whether the voucher discount has been supplied free of
charge or purchased for consideration should be whether or not the customer has the
right to pay less if he does not want the vouchers being offered to him.
3.1.1. Discount voucher
Discount vouchers are a subcategory of free vouchers.
Like all vouchers, these vouchers carry a right. This is a price discount expressed either
as a percentage or as a fixed amount (with a face value). The mere expression of a face
value in currency should not change the nature of the voucher since it only represents a
right to a discount from the refunder (directly or via a redeemer). Therefore they should
not be seen as carrying a money value strictu sensu since they generally cannot be
4
For the purpose of this paper, the following terms are used:
Issuer
the person materially issuing a voucher
Refunder
the person who bears the economic consequences of the content of the voucher (it
may be the same as the issuer)
Redeemer
the person who redeems the voucher but doesn’t necessarily bear the economic
consequences of the content of the voucher (it may be the same as the
refunder)
Retailer
often is the same as the redeemer.
4
redeemed for money independently from the sale of the product being promoted by the
voucher5. It is necessary however to draw a distinction between a discount voucher
entitling a customer to a discount off a product or service with instances where a voucher
is sold at a discount and the discount is simply the way intermediaries earn their margin.
3.1.1.1.
Discount voucher refunded by the redeemer
If the redeemer is different from the issuer, then this kind of discount vouchers usually
carries a right to a rebate instead of a right to receive goods or services: that right is
usually expressed through a value inscribed in or recorded on the voucher. As there is no
consideration involved but only a rebate, there are no other VAT consequences than the
lowering of the taxable amount of the supply of goods or services giving right to the
rebate.
3.1.1.2.
Discount voucher refunded by a third party
Among the discount vouchers, there are some special kinds such as discount vouchers
that can be redeemed by a retailer but are actually refunded by a third party (the issuer or
another person on behalf of the issuer). When a "free" voucher is refundable by a third
party it means that, in addition to the right of the customer to receive a price discount
there is an underlying right of the redeemer to receive money from the refunder (i.e.,
issuer or another person acting on his behalf). This type of voucher should therefore be
covered by any general definition of vouchers since there is a real value to be refunded to
the redeemer. The precise VAT treatment may however require further analysis.
The views of concerned parties are invited on the analysis above.
3.1.2. Business gifts
In addition to the vouchers mentioned above there is a particular kind of free voucher
which carry a right, sometimes expressed as a monetary value, to be exchanged for
particular goods or services without any additional payment. In other words they don’t
carry any right to a rebate.
3.2.
Single Purpose Voucher (SPV)
An SPV could include all the elements provided for in the general definition but limited
to an identified good or service per voucher, redeemed by an individual redeemer (or
refunder).
Therefore an SPV includes all material or immaterial support media (i.e. a ticket, a token,
a card, an electronic message on a chip or other medium, generally accessed by a P.I.N.)
which carries a right to receive identified goods or services, or to obtain a discount when
acquiring that good or service, or to receive a refund at the time of the redemption from
an individual redeemer (or refunder). That right may be expressed in multiple ways: as a
value expressed in terms of monetary value6 or of percentage (percentage reduction) or
of units or of quantity.
For reasons of practicality, it is suggested that a voucher ceases to be an SPV when the
5
Often those vouchers are attached to goods.
6
The currency cannot be considered as money but only as a way to measure the quantity of goods or
services to which the voucher gives right..
5
applicable VAT rates for the redeemable goods or services varies or cannot be known in
advance. There are particular issues which arise when a voucher is capable of being used
to acquire goods or services in a Member State other than where it was first issued.
A voucher could however be regarded as an SPV even if it may be redeemed, for single
or multiple goods or services, by one or more redeemers on condition that those goods or
services are already identified at the time of the supply of the voucher and the voucher's
sale revenues are already attributed to the redeemer (or refunder) as if the voucher were
already redeemed (or refunded), i.e. independently form the real redemption. In that case
the sale revenue is typically attributed on the basis of statistical data rather than on the
effective use7. Inevitably however complex treatments of this type may give rise to
control issues for tax administrations.
3.3.
Multi Purpose Voucher (MPV)
Defining an MPV should be relatively straightforward if it were to cover, at least prima
facie, any voucher not falling under any other category.
The suggested general definition mentioned in paragraph 3.1, for vouchers tout court,
could be well used as a definition of multi purpose vouchers8 with exclusion of vouchers
already defined elsewhere.
MPVs should not, however, extend to systems whose objective is only to provide a
vehicle for payment for an open-ended range of goods and services. In other words an
MPV, should be considered as such until it ceases to be a voucher and become a more
general means of payment under the terms of Article 13B(d)3.
The relationship between vouchers and payment systems and the related VAT treatment
is looked at below.
4.
VAT TREATMENT
4.1.
Multi Purpose Vouchers and payment services
Where vouchers function as general payment services, the provisions of article 13B(d)3
of the Sixth Directive should apply, leading to VAT exemption as a financial service.
This would be necessary to assure neutrality in taxation between different payment
system providers.
One option therefore would be that the fee or charge applied to cover the costs of a
transfer of money from one point (say the mobile phone) to another point (the seller) as
well as the profit margin of the system's operator should be covered by the exemption of
Article 13.
The administrative burdens associated with VAT exemption (e.g. pro-rata calculation)
may however be seen as disproportionate, hindering new developments in the market or
driving the way in which services are developed. One suggested approach here might
involve a wider use of the option to tax under Article 13C, making it available to all
providers of payment systems.
7
As an example of that kind of vouchers we may recall several integrated bus-metro tickets where the
actual consumption of a multiple ticket is not verified or verifiable.
8
As an example of an MPV would be certain mobile phone cards giving the right to buy goods and
services other than telecom services.
6
Where vouchers function to recharge or create credit on an account the underlying
transaction should be seen as a supply of money and therefore outside the scope of
VAT9, Such a conclusion with regard to redemption does not prejudice the VAT
treatment of any fees or charges applied to purchase or acquire a voucher. One approach
might be to consider the fee or charge as being part of the voucher value tout court. This
however would ignore the reality that a fee or charge is not designed to be part of the
value but is generally aimed to cover either some administrative costs of the voucher or
the costs of transferring of money from one point to another or the profit margin of the
operator or distributor.
As it is evident there are different possibilities to how these vouchers might be treated
but the result should achieve neutrality between different ways of effecting the same
service (i.e. making a payment).
The views of interested parties are therefore invited.
4.1.1.
The taxable amount
The sale of an MPV should be considered as outside the scope and it is not necessary to
identify the taxable amount of the voucher in itself.
The taxable amount of goods and services supplied against an MPV is, in most
circumstances equal to the consideration paid by the customer plus the value of the MPV
effectively used to acquire those goods or services. This would equally be the case
whether redemption of the voucher is partial or in full.
However in circumstances where the issuer of the voucher is not the redeemer, the
taxable amount of goods or services supplied is equal to the consideration paid by the
customer plus the money paid to the seller by the issuer/refunder(i.e. the amount
effectively deducted from the voucher)10 instead of the consideration paid by the
customer plus the value of the MPV effectively used.
4.1.2.
Time of supply
The “payment on account” provided for in Article 10.2 second paragraph, should be
applicable, as far as is practical to MPVs. The point in time when the tax becomes
chargeable should therefore be "on receipt of the payment and on the amount received"
i.e. when the voucher is redeemed by the final consumer. However, as seen above, in
order to be applicable, the current wording of Article 10(2) requires that the goods and
the services to be received should be known at the time of sale and that requirement is
not fulfilled by the MPV vouchers. Therefore as those goods or services are not known at
the time of sale it is not possible to ascertain, at the moment the voucher is sold, exactly
what goods or services could be received by the owner of the voucher on redemption.
Following the interpretation in the BUPA case (see below), there is the possibility that a
sum could be given to someone, in this case a company, without implying that this sum
should be regarded as a payment. Some further consideration needs to be given to the
practical consequences of this.
In so far as the time of supply is concerned, it would seem this would not be the time of
9
In this respect it is no different from the operation of transferring money to a credit card or stored value
card.
10
Any charge eventually applied by the operator of the system to the merchant for providing the payment
system should be included in the taxable amount as clarified by the ECJ in Bally (C-18/92).
7
the sale of the voucher but rather the time of the effective use of the voucher11. This
would also be necessary where the amount or rate of VAT cannot be known in advance.
4.1.3.
Place of supply
If the sale of an MPV is treated as outside the scope (see above) or as a mean of
payment, VAT could be applied only at the time of its redemption and therefore the place
of supply of the goods or services supplied at that time will follow the normal rules
depending on the nature of the supply for which the MPV is used to pay the
consideration due by the client to the supplier.
In the cases where the vouchers are neither considered as out of scope nor a mean of
payment, the operators may in the future have to contend with different places of
taxation, in particular in cases where a voucher can be used across several Member
States to acquire a range of goods and services or indeed just one service such as
telecom. This seems, however, to be an exceptional situation.
In this context, changes in the place of supply rules for telecom and other B2C services
which are currently under discussion in the Council may carry implications for the way
in which VAT is applied.
For an essentially anonymous instrument such as a voucher, the correct application of
taxation may raise some issues. The issues raised and the options for their resolution
require further attention.
The views of affected operators are now being sought.
4.2.
Single purpose voucher (SPV)
4.2.1.
The taxable amount
There are conceptual differences underlying the taxable amount of an SPV and the
taxable amount in the supply of the good or service which may lead to variations in
certain circumstances.
The taxable amount of an SPV is equal to the consideration effectively paid by the
customer and, in principle, the taxable amount of any supply entirely obtained through
the redemption of a voucher would be equal to the expenses incurred by the consumer in
order to acquire the relevant voucher12.
This will be the case when the voucher is issued and refunded by the same taxable
person. Different results in terms of taxable amount may however occur if the redeemer
is different from the refunder13.
11
Some telecom contracts provide a mix between prepaid vouchers and payments in arrears. Typically the
contract provides for that a fixed sum paid on a monthly basis and, if the expenditure made during
that month exceeds the amount already paid an invoice is issued for the correspondent amount. As
long as this is treated as a the provision of a straightforward payment system, there should be no tax
problem.
12
The Commission services are aware of the opinion that a prepaid voucher cannot be redeemed for a
good or a service without any additional payment because it would otherwise loose its nature of
prepayment. However, for reason of simplification, the interpretation of article 10.2, as applied
above, should be considered.
13
It is preferable to distinguish between the refunder and the issuer since they can play two distinct roles.
This distinction avoids any confusion between the person actually refunding the voucher (who carries
the economic cost of the voucher) and the person managing the voucher (e.g. issuing company) which
8
Such vouchers carry a right which is, in all cases, predetermined from the outset and
therefore the redeemer (and the refunder) will not act on the basis of the total
consideration paid by the customer but rather on a predetermined value. In consequence
the taxable amount is determined on the basis of the refund effectively paid to the
redeemer14 by the refunder. Any consideration paid in addition to the predetermined
value should therefore be attributed to other costs and not to the content of the voucher.
This however should not have an impact on the trader’s VAT computation since it will
be paid at each stage and the total taxable amount will be accounted for as far as he is
concerned: what changes is the nature of the transactions being taxed which could
include not just the sale of the right inherent in the voucher but also a distribution fee.
4.2.2.
Time of supply
As suggested above, a SPV would be a voucher giving a right to receive only a specific
good or service with the customer paying in advance for what will be receive later.
The point in time when the tax becomes chargeable is currently regulated by Article 10
of the Sixth VAT Directive. Article 10.2 second paragraph provides that the tax becomes
chargeable “on receipt of the payment and on the amount received” where a payment is
to be made “on account before the goods are delivered or the services performed”. The
last phrase refers to goods and services to be received when the quantity is not already
known. To apply this provision to the vouchers it is necessary that the voucher is linked
to a “quantity” or a “unit” of a good or a service already identified.
Therefore the application here of the above-mentioned Art 10(2) rule should not cause
any particular problem and VAT can be charged at the time of sale on the basis of the
consideration paid. Such a treatment should be applicable to all single purpose vouchers.
The VAT rate applicable to prepaid vouchers should be the same rate applicable to the
good or service which can be received through the redemption of the voucher.
If a voucher can be used in more than one Member State, VAT would have to be
accounted for in manner which deals correctly with differences in VAT rates. One could
however envisage treating these vouchers in the same way as MPV, as it is impossible to
identify, when this kind of prepaid voucher is issued, in which way it will be used by the
recipient.
4.2.3.
Place of supply
In principle, as an SPV could be used only for specified goods or services, the place of
supply is easily identifiable with the present rules. However if the future development of
SPV could allow them to be used cross-border then together with the essentially
anonymous nature of vouchers, issues may arise which need attention.
These issues and the options for their resolution require further attention.
The views of affected operators are now being sought.
4.3.
Discount voucher
often act on behalf of the refunder. That distinction is not affected by the fact that the refunder and the
issuer may sometimes be the same person.
14
This is the case, for example, when a concert ticket is sold by a distributor (refunder) which will pay to
the redeemer (the concert manager) a price which is less than the price the customer paid for the ticket.
9
The difference between the taxable amount of the voucher and the taxable amount of the
supply of the good or service is usually evident when dealing with discount vouchers
which will not usually have (with the exception of discount vouchers refunded by a third
party) any taxable amount itself but affects the taxable amount of the related supply.
The assessment of the taxable amount of the supply occasioned by discount vouchers has
been already addressed by several ECJ judgements15 to which reference is made.
Their practical application may however cause some problems, especially in cross border
situations, for example with respect to the refund of discount vouchers attached to goods
redeemed in a Member State other than the one in which the goods have been sold.
In principle the amount of the refund should be equal to the face value of the voucher,
giving the issuer the right to reduce correspondingly the taxable amount of the sale of the
relevant goods. However when the good is sold in another Member State and the voucher
is redeemed there, the refund is always equal to the face value of the voucher but the
taxable amount of the sale of the relevant good can not be adjusted.
This potentially produces distortion of competition, in terms of VAT, between businesses
established inside and outside of the Member State where the voucher is redeemed (or
where the good to which the voucher is attached has been sold). It is also important to
distinguish between discount vouchers proper and vouchers sold or issued at a discount.
Finally it seems that the VAT treatment of business gifts set out in the Sixth Directive is
clear.
Comments are invited on this issue in order to consider significance and possible
solutions.
5.
OTHER RELATED ISSUES
5.1.
Premium rate
Although not strictly related to vouchers, a VAT issue arises in relation to the use of
premium rate phone services as a payment vehicle. Goods or services can be bought via a
phone call or an SMS where a special enhanced tariff is applied. All or part of the
additional revenue is passed to a third party such as the content supplier16 or, in some
cases, a designated charity.
These kinds of transactions are always taxed as telecom services while they are often, a
composite service where the call costs are lower by far than the cost of the content
provided or the donation made. Tax issues arise both in relation to the place of supply
(diverging perhaps between the content and the telecom service) and the VAT rate (e.g.,
a donation to a charity being outside the scope of VAT).
The role of the various parties and the contractual structures may be significant in the tax
treatment. For example, when the content is not directly supplied by the telecom
operator, then the telecom operator could be regarded as providing payment services and
the place of supply of both operations (sale plus payment) would follow the current rules.
On the other hand, when the telecom operator directly supplies the content (good or
service), the telephone service may be incidental to the main supply
15
A short summary of principles expressed by the ECJ on that and other related issues can be found in
Section 6.
16
Supplier of contents like games, newspaper, parking services, metro tickets, ring tones, songs, news,
weather report, horoscope, a.s.o.
10
Views are invited on how this type of transaction should be treated for VAT.
5.2.
Unredeemed vouchers
Some further questions need to be considered in the treatment of unused vouchers.
Vouchers often have an expiry date after which they cannot be redeemed. That date
limits the voucher's life for commercial or administrative reasons determined by the
issuer and, presumably, accepted by the other parties involved. If the consideration is
refunded (which is not often the case) the sale transaction should be regarded as not
effected and an adjustment in terms of VAT should be made17.
If consideration is not reimbursed then, from a VAT perspective, consequences are
different for SPVs and MPVs. As the time of supply of an SPV is the time of the sale of
the voucher, the fact that a voucher will be not reimbursed does not change the situation
– the supply is regarded as being already effected. If MPVs are not taxed at the time of
sale or before being used, the amount in the hands of the issuer is not regarded as
consideration for a supply and thus exceeding an expiry date applied to that amount will
result in an enrichment of the issuer without any supply.
Under current rules that amount can remain untaxed as no transactions are involved. If
material, some modification of Article 10 could be envisaged in order to create a
chargeable event at the time of the expiry date of a supply of money that gives a right to
use that money or to be reimbursed. It may however be the case that the administrative
changes involved would outweigh any tax revenue.
6.
SOME TAXATION PRINCIPLES FROM EUROPEAN COURT OF JUSTICE CASE-LAW
The ECJ has addressed this topic several times since 1988. Inevitably this has been on a
case by case basis and not all kinds of vouchers have been considered. Moreover some
principles expressed in the judgements have been difficult to apply by Member States
and/or the operators. What follows is an attempt to summarise these decisions,
categorised according to the issues addressed.
6.1.
Taxable amount
The ECJ has sought to clarify how to calculate the exact taxable amount paid (or partially
paid) by the consumer with a voucher in the following cases:
In Boots Company (C-126/88) involving a voucher issued by the retailer itself which
gave a right to the customer to a discount on future purchases from the same retailer, the
court held that as the voucher in that case represented a simple rebate its value (face
value) should be not included in the taxable amount. In this case there was not a
transaction chain as the issuer was also the retailer and the redeemer. The ECJ did not
look at the situation where one of those vouchers is redeemed by a retailer (belonging to
the same chain) in another Member State.
Argos Distributors Ltd (C-288/94) concerned a face value voucher sold through an
intermediary (a company or another consumer). The ECJ stated that the consideration (to
17
VAT adjustments of SPV should be made along all the distribution chain in order to obtain a neutral
situation. However it has to be understood that very often, whether the reimbursement of the expired
voucher is allowed, the consideration is reimbursed directly by the issuer. That reimbursement is
usually not the equal of consideration paid by the customer but of money effectively received by the
issuer at the issuing time of the voucher to be reimbursed (which often does not contain distribution
costs). In case of MPV reimbursement there is no VAT to be adjusted and the amount reimbursed
should be the equal of the face value.
11
be precise the value) represented by the voucher was the sum actually received by the
supplier upon the sale of the voucher. They took also into account here that any surplus
value still attaching to the voucher after a purchase would not be redeemed18.
In Elida Gibbs (C-317/94) the ECJ addressed a different situation, that of a money-off
voucher. A manufacturer sold goods with a voucher attached to the product. This was
sold through a transaction chain (wholesaler and retailer). Once the product was bought
by the final consumer, the voucher was given back to the retailer (redeemed) and via the
retailer to the manufacturer itself who was the final redeemer. The question was again
how to calculate the exact taxable amount of the good paid (or partially paid) by the
consumer with the voucher. The court held that Article 11(A)(1)(a) and Article 11(C)(1)
of the Sixth Directive are to be interpreted as meaning that the taxable amount of the
good (paid or partially paid) is equal to the sale price charged by the manufacturer, less
the amount indicated on the voucher and refunded. The court also said that the same
solution should be applied to a cash-back voucher.
In European Commission v. Germany (C-427/98), the court confirmed that the
retailer’s taxable amount for the sale to the final consumer is the full retail price, namely
the price paid by the final consumer plus the amount reimbursed to the retailer by the
manufacturer.
6.2.
Transaction chain and VAT refund or adjustment
In Elida–Gibbs, the court held that a VAT adjustment through the chain was
unnecessary because the neutrality of the VAT was already assured by the architecture of
the VAT system in itself.
In European Commission v. Germany the court said that it was mandatory to adopt the
measures necessary to allow adjustment of the taxable amount for the taxable person who
had effected reimbursement where money-off coupons are reimbursed. As regards
exempt supplies in export or intra-community transactions, the tax authorities could
make use of Article 11(C)(1) to prevent the manufacturer from deducting from his output
VAT that would otherwise be a fictitious VAT amount and that any over-deduction
resulting from subsequent reimbursement of a voucher should be effected by adjusting
the deduction of input tax in respect of that final consumer in accordance with Article
20(1)(b).
6.3.
Chargeability of the tax
BUPA Hospitals (C-419/02) is a case that has been heard with two other cases (Halifax
and Huddersfield University). Here the court was asked to decide whether some
particular transactions aimed at avoiding VAT can be disregarded, at least from a fiscal
perspective. For BUPA the question was whether a payment that, at the time it is made,
does not provide for any specific goods or services to be supplied, can be still considered
as a pre-payment under Article 10(2) of the Directive.
Such prepayments (where lump sums are paid for goods mentioned in general terms on a
list, alterable at any time by agreement between the buyer and the seller and from which
the buyer may possibly select articles, on the basis of an agreement which he may
unilaterally rescind at any time, recovering the unused balance of the prepayments) do
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The ECJ did not take the opportunity to explain what should be the VAT treatment of the voucher or the
taxable amount at the intermediary level, nor answered to the question of the VAT treatment of
vouchers unredeemed or partially unredeemed.
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not fall within the scope of the second subparagraph of Article 10(2) of the Sixth
Directive .
The court appears to have arrived at this decision via the following reasoning.
It said that “the tax may become chargeable at the same time as or after the occurrence
of the chargeable event but, subject to any provision to the contrary, not before it. … The
second subparagraph of Article 10(2) departs from that chronological order by
providing that, where a payment is to be made on account, the VAT becomes chargeable
without the supply having yet taken place. In order for the tax to become chargeable in
such a situation, all the relevant information concerning the chargeable event, namely
the future delivery or future performance, must already be known and therefore, in
particular, … when the payment on account is made the goods or services must be
precisely identified.
… It must also be borne in mind that it is the supplies of goods or services which are
subject to VAT, rather than payments made by way of consideration for such supplies… .
A fortiori, payments on account of supplies of goods or services that have not yet been
clearly identified cannot be subject to VAT”.
From that judgement we can deduct that:
•
a transfer of a sum of money is not necessarily a prepayment and thus is not
necessarily relevant from a VAT perspective;
•
a payment should be no more regarded as a prepayment if it can be applied to more
than one type of good or service. This concept can be further developed according
to the practicality of commerce.
7.
SUMMARY AND CONCLUDING REMARKS
From the foregoing analysis, the issues in relation to the VAT treatment of vouchers can
be seen as falling under four distinct areas. Whilst there is a clear continuum, in each
case there are different points of tension which might indicate that different vouchers
occur.
7.1.
Discount vouchers
Discount vouchers are a common phenomenon in most Member States, typically attached
to goods or distributed via a newspaper. For the most part their use has been localised in
a single Member State but market integration and the spread of the Euro has started to
change this.
The Commission is inviting the views of interested parties on what measures need to be
considered.
7.2.
Single-purpose vouchers
SPVs may be of various kinds but if the limits of this type of voucher are determined by
certainty about the applicable VAT charge, then it is possible to be clear about what falls
within the category. The term "single purpose" could be interpreted as covering in
principle a defined VAT rate category in a single Member State. This would therefore
seem ab initio to exclude vouchers which can be used to acquire a range of goods or
services where the VAT rate is different and vouchers which can be used to acquire a
single good or service, but in several Member States.
An SPV should be treated at the time of sale as a prepayment for goods or services, this
would seem to offer a workable solution which would meet the objectives set out in
Section 2.
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The definition of an SPV could be stretched, covering a range of goods or services,
perhaps even from different suppliers, as long as there is certainty on the VAT
implications. Where there are several commercial parties to the SPV related transactions
and the value of service supplied by each is identifiable under normal accounting rules
and the taxable base can be readily ascertained, no matter how many parties are involved,
it would seem that keeping the tax rate in conformity with the rate for the underlying
transaction is the most efficient approach for all concerned.
Furthermore, some vouchers are sold at a discount whilst others with exactly the same
purpose are sold at face value with a commission being charged. In logic, there is no
difference between the two operations – should they therefore not be treated in the same
way for VAT?
A legislative definition with common rules for the taxation of SPVs should reflect all of
this.
7.3.
Multi-purpose vouchers
By their nature, when an MPV is issued, it is impossible to know what will be the correct
VAT charged on any goods or service eventually acquired through the voucher.
It follows therefore that any attempt to account for or charge VAT at the time of sale of
the voucher will be distortive and potentially gives rise to opportunities for tax
arbitraging or avoidance.
The existing leakages of VAT arise from situations where some Member States tax
certain vouchers at the time of issue on the historical assumption that they are dealing
with an SPV. Commercial demand, changes in technology and de-regulation mean that
most present vouchers are effectively MPVs and inconsistency in their treatment gives
rise to mismatches in taxation.
In the case of MPVs generally, it seems inescapable that to correctly assess what tax is
due, regard will have to be taken of the place of the redeemer (effective, not deemed) and
the place of supply rules should be applied accordingly.
Just as with an SPV, where there are several commercial parties to the SPV related
transactions, the value of services supplied by each is also identifiable under normal
accounting rules and the taxable base can be ascertained, irrespective of the number of
parties involved and the Member State in which they are located. The taxable value of
the input supplied by each party should be the basis for charging VAT, whether this is
described as a margin, a handling fee or other charge.
Mention has already been made of how MPVs can evolve into more general payment
systems.
Rather than attempt to define what falls within the MPV category, one approach might be
to define all other types of vouchers or payment systems and to leave this as a residual
category.
The views of stakeholders are requested on these questions.
7.4.
Innovative general payment schemes
Article 13B(d)3 of the Sixth VAT Directive requires Member States to exempt the
provision of payment transactions from VAT. To come within the exemption, these do
not have to be linked to a current account provided by a bank.
Today, payment systems are provided by a range of non-traditional operators who were
not envisaged at the time the Directive was enacted. In some cases, these have evolved
from voucher type systems.
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Guidance, and perhaps legislative clarification, is now needed on exactly what operations
fall within this provision although where the core purpose of any operation is to support
a payment, the outcome seems clear. This is needed by both Member States and
operators.
Comments are therefore needed about whether and how vouchers are involved in the
payment transactions and how to deal with neutrality between vouchers and payment
systems.
7.5.
Concluding remarks
Many of the issues mentioned in this paper have already been the subject of discussions
with representatives of business and the Member States.
The Commission is of the view that as technology and business models continue to
evolve and give rise to new VAT issues it is now time to revise the legislation in this area
giving clear rules which should be able to cope with possible future evolution of those
instruments.
Accordingly comments are invited on the contents of this note from interested
parties on the issues identified and on possible options for addressing them.
The ideas set out reflect the analysis of the Commission's services and, as such, may not
necessarily be an exhaustive catalogue of all the issues needing attention or include the
full range of possible solutions.
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