5.4.6 Other rebates granted by another person than the party making the (direct) supply

It is also possible that a business grants a customer of a certain product a rebate off a supply he has not made himself, because that business will also benefit from an increase in the sales of the other business’s products. An example could be a manufacturer of a specific type of coffee pads that can only be used in coffee machines manufactured and sold by another business. It is possible, but not necessary, that these businesses have agreed to some form of cooperation in marketing their products jointly.

In these types of scenarios, one party may offer the purchaser of a certain product that it purchased from another party (or that was manufactured by another party) a rebate (often in the form of money off or cash back). This rebate could be considered a business expense, or costs incurred for performing a promotional activity, because the aim of funding the other party’s product is increasing one’s own turnover of products that may depend on the use of the other party’s product, as in the above example.

Under the current EU VAT rules, these payments should be considered third-party payments. In my view, it would be difficult to argue that these payments constitute discounts since there was never a supply of the product that is now partially funded through the payment. In other words, there is not even a leapfrog. These scenarios are better comparable to the case ruled by the CJEU about the travel agent that offered travellers a discount to a travel that they booked directly with (and paid for directly to) a tour operator.1 These payments do not lower the taxable amount for the supplies made by the business funding the discounts, and they have no other effect on the VAT position of these businesses either.