9.7.4.2 The same voucher can be an SPV or an MPV

Under the EU VAT rules, it can be argued that issuing a voucher free of charge leads to the taxation of the underlying transaction if all relevant requirements are met. This means that if, at the time of issuing the voucher, the voucher (i) qualifies as a voucher and (ii) the taxable amount and the place of taxation of the underlying transaction are known at the time of issuing the voucher, the underlying transaction will be deemed to take place at the time of issuing that voucher.

If the voucher is issued free of charge, the taxable amount for the underlying transaction is determined as follows:

If the underlying transaction qualifies as the supply of a service, the taxable amount shall be the full cost to the taxable person of providing the service.1

If the underlying transaction qualifies as the supply of a good, the taxable amount shall be the purchase price of the good or of a similar good or, in the absence of a purchase price, the cost price, determined at the time when the application, disposal or retention takes place.2

This means that where vouchers are issued (or supplied) free of charge, taxation of the underlying transaction can only take place if the exact underlying good or service is known at the time of issuing the voucher. Knowing the applicable VAT rate is not sufficient, not even in a jurisdiction that has only one VAT rate, because if you don’t know exactly which good or service will be provided at redemption of the free voucher, the taxable amount of that underlying transaction cannot be determined at the time of issuing the free voucher, and therefore the voucher does not qualify as an SPV. ‘single-purpose voucher’ means a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher.3 If the taxable amount is not known at that time, neither is the VAT due on those goods or services.

The above provides an additional ground for my view that, under desired or appropriate law, the issuing of an SPV should not trigger the taxation of the underlying transaction. I will use the following example to explain this.

A chain of shops sells goods that are all subject to the same, standard, VAT rate, e.g. clothes.4 It also sells face value vouchers that can only be used to obtain clothes from that (chain of) shop(s).

If the shop supplies such a face value voucher for consideration to one of its customers, VAT will be due under the EU VAT rules, because issuing that voucher shall be regarded as a supply of the goods to which the voucher relates5 and the taxable amount shall be everything that the shop has received in return for that supply, i.e. the consideration received when issuing the face value voucher. Therefore, the voucher qualifies as an SPV.

If the shop issues that exact same face value voucher to one of its employees for free, the exact same voucher qualifies as an MPV, because at the time of issuing that free voucher the shop does not know exactly which item of clothing the employee will redeem the voucher for. This means that the taxable amount cannot be determined at the time of issuing the voucher, because the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, of the good to which the voucher relates cannot be determined at that time.

This means that the exact same (face value) voucher can be an SPV or an MPV, depending on whether it is issued for consideration or not.

Treating the same voucher as an SPV when issued for consideration and as an MPV when provided free of charge means that businesses will have to be able to process this in their bookkeeping systems. In my view, allowing the transfer of one item to have two completely different VAT treatments is not in line with one of the aims of the EU VAT Directive, which is ‘to achieve the highest degree of simplicity and of neutrality’, according to recital 5 of the EU VAT Directive.