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New VAT rules for vouchers

6 language versions available in PDF formatNeue MwSt. Vorschriften für Gutscheine
Nuevas normas sobre el tratamiento de los bonos a efectos del IVA
Nouvelles règles de TVA applicables aux bons
Nuove norme in materia di IVA per i buoni
Nowe przepisy o podatku VAT od bonów na towary i usługi
New VAT rules for vouchers

The absence of EU legislation on the VAT treatment of vouchers causes problems for businesses and tax authorities. New rules proposed by the European Commission (EC) seek to create a genuine single market for vouchers.

Vouchers market and its regulation

© Comugnero Silvana / Fotolia

© Comugnero Silvana / Fotolia

The value of the European vouchers market is estimated to be more than €52 billion a year. Prepaid telecommunications vouchers account for almost 70%, followed by gift vouchers and discount vouchers. Consultants emphasise that in recent years the use and functionality of vouchers have been increasing rapidly.

Existing EU VAT legislation does not contain a definition of “voucher” or any rules dealing with transactions in vouchers. Eight referrals to the Court of Justice have produced some case law, but this is of limited help outside the specific questions and particular circumstances of those cases.

Currently, EU Member States’ (MS) laws are not coordinated at EU level. When a voucher is issued in one MS and used in another, this may result in either double taxation or non-taxation: some MS levy VAT on the voucher upfront, while others tax it only at the time goods or services are supplied. If a voucher is issued in an MS in the former case and redeemed in one in the latter, double taxation occurs (the opposite causes non-taxation). This leads to distortions in the single market, uncertainty for companies and tax authorities, and hampers growth of the voucher market.

Commission’s proposal

In May 2012, the EC proposed a Directive to reform the VAT treatment of vouchers. It follows a 2006 public consultation in which respondents signalled the need to clarify the VAT rules. The EC impact assessment concluded that the necessary legal certainty in taxation of intra-EU commerce can only be achieved through EU legislation. The main elements of the proposal are:

  •        Harmonising the definition, and the time and point of taxation of vouchers: either when sold (single-purpose vouchers) or on redemption (multi-purpose vouchers),
  •        Distinguishing vouchers from other payment forms (mobile payment services),
  •        Introducing common rules for cross-border distribution of vouchers via a chain of intermediaries.

The Commission aims to have the new provisions in force from 1 January 2015.

Reactions

The Commission’s proposal was generally welcomed by stakeholders, who also signalled some possible improvements. A European Parliament (EP) study from 2012 concluded that the proposed Directive would help to reduce uncertainty on when to tax different vouchers across the EU.

The European Economic and Social Committee called for the tax exemptions on promotional vouchers applied in some MS to be abolished. The Committee also noted that the lack of transitional provisions and the absence of rules in case of non-redemption of single-purpose vouchers (to reverse VAT paid upfront) may lead to problems in the future.

Tax practitioners argue that some issues remain unresolved: the distinction between a multi-purpose voucher and other means of payment needs to be clearer, and there is a risk that many companies will focus mainly on vouchers with VAT paid on redemption, to avoid taxation. They also expect that implementing the new rules will be burdensome for small businesses.

Legal analysis reasons that tax rules on place of supply of services (notably telecom­munications) need to be reformed, as they are likely to be affected by the proposal.

European Parliament

The Economy and Monetary Affairs Committee voted in February 2013 its report on the Commission’s proposal (rapporteur: Ildikó Gáll-Pelcz, EPP, Hungary). The Committee called for a report on the Directive’s overall economic and fiscal impact (in each MS) by 2017.

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