9.6.4 Vouchers-for-cash

This Section is about businesses that issue vouchers with a fixed or nominal value, for consideration, where the voucher entitles the holder to exchange it for a higher amount of money than the (total) nominal value at the issuer of the voucher.

These vouchers, often in the form of trading stamps, are usually purchased for a small consideration together with the supply of goods or services, and a certain specific, agreed amount of vouchers can be exchanged for a cash amount that is slightly higher than the total amount paid for the collected vouchers together.1 For the businesses that issue these vouchers, this is just another loyalty scheme involving vouchers. For the purchasers of these vouchers, this scheme resembles saving money in return for interest. Be that as it may, in my view, this voucher scheme is not a VAT exempt financial transaction.2

The difference between the amount of money that is paid for the vouchers and the money that is received upon redemption is a reward in cash paid by the business in return for consumer loyalty. People cannot deposit random amounts of money at the business in return for vouchers and expect a higher payment at a later stage: vouchers can only be purchased if a certain amount of money is spent on products (goods or services) from the business. From an economic perspective, the business could have also just given away the vouchers for free and paid the ‘extra amount’ upon redemption. The fact that vouchers have to be purchased has two advantages for the business: the business has the money at its disposal, enabling it to use it as working capital, which has a certain value, or to invest in order to try to earn at least the ‘extra amount’ that has to be paid upon redemption. The other advantage is that there will always be people that do not redeem the vouchers,3 thereby forfeiting their right to the money paid for the vouchers. This means that the scheme creates both a cash flow as well as a real cash advantage to the business, besides stimulating customer loyalty, which is meant to increase turnover as well. Therefore, this voucher scheme is based on an entirely different business model than plain ‘saving money for interest’.

The payment itself does, in my view, not create any VAT liabilities because in most cases, the underlying agreement will not explicitly include that the money is consideration paid in return for customer loyalty. I consider it payment for being (and staying) a customer, which is outside the scope of VAT.4 This means that the money paid back (or the margin) should also not be considered a discount that should be divided equally over the purchases that were made together with the issue of the vouchers.