9.5.2.11 The VAT treatment of redeeming MPVs

Under Article 30b(2) of the EU VAT Directive, the actual handing over of the goods or the actual provision of the services in return for a multi-purpose voucher accepted as consideration or part consideration by the supplier shall be subject to VAT. At that time, the nature of the supply will have to be determined in order to apply the correct VAT treatment.

Non-redemption, and the breakage that is a result of that, does not trigger any VAT consequences. Breakage is payment received for an activity that is not subject to VAT. Although it could be argued that an activity that is not subject to VAT qualifies as a non-economic activity, I would say that issuing MPVs, especially as part of a promotional activity, is only done to increase the taxed business activities and therefore the MPV related activities all fall within the scope of VAT, even though not all activities are subject to VAT.

Article 73a of the EU VAT Directive dictates that the taxable amount of the supply of goods or services provided in respect of an MPV shall be equal to

less the amount of VAT relating to the goods or services supplied.

If the actual handing over of the goods or the actual provision of the services in return for an MPV accepted as consideration or part consideration is not done by the business that issued the MPV for consideration, the supplier of the goods or services may have to pay VAT based on the consideration paid for the voucher or its monetary value, even if the amount he receives as reimbursement is lower than either of those two amounts. This is not in line with the result of the CJEU’s Argos-case1 and the Yorkshire Co-operatives-case,2 where the CJEU held that the sum of the reimbursement received for accepting the vouchers constitutes (part of the) taxable amount for a supply using MPVs. This is based on Article 73 of the EU VAT Directive, which stipulates that the taxable amount is the consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party. This is not the amount received by someone else in the ‘voucher chain’ nor the monetary or face value of the MPV.

However, using ‘the amount paid by for the voucher’ could be in line with the purpose of EU VAT, i.e. taxation of expenditure for local private consumption, in cases where the final customer actually purchases the MPV. In those cases, the expenditure of the final customer should be taxed, because in the end that is what he paid for obtaining the relevant goods or services upon redemption of the MPV.

On the other hand, the economic and commercial reality of transactions involving MPVs is that in my above example, the business that is reimbursed for accepting the MPV by the issuer of the MPV may have to pay more VAT than he would have to pay if the same client would not have used an MPV but cash to purchase the goods or services. In my view, however, the lower amount received by the supplier of the goods or services can be compared with the business in the Bally-case3 that received a lower amount than the advertised and agreed sales price of his products because of an agreement with a credit card company, that withheld some funds for its services. In that case, VAT was also due on the actual sales price of the goods and not the amount received from the credit card company. The sum so deducted should be included in the taxable amount on which the supplier, as the taxable person, must pay tax to the revenue authorities.4 The lower amount in the Bally case was the result of deducting an agreed fee amount for services performed by the credit card company from the amount to be received as consideration for the supply made by Bally. The CJEU simply decided that a consideration paid for a service received by a taxable person cannot lower the taxable amount for a supply made by that taxable person. For transactions involving MPVs, the lower amount can also be the result of such agreed services.5 In my view, the lower amount can also be the result of settling the consideration for the supply of goods or services with an ‘implied’ service by the business paying the reimbursement.6