9.7.3 CJEU dissenting ruling: the issuing or supply of a voucher is a service that is subject to VAT

Above I briefly described some CJEU cases that deal with the VAT consequences of (specific types of) vouchers. In the Astra Zeneca-case, the CJEU held that the supply of a voucher is a service that is subject to VAT.1 I disagree with this view. Even though I cannot prove this, I am convinced that in this specific case, the CJEU was so focused on solving an issue closely linked to a voucher transaction that it completely overlooked the simple fact that the supply of a voucher is not the object of a transaction and therefore not a supply that is subject to VAT. Also, in this case the CJEU applies some logic that – in my view – oversimplifies this type of transactions, by deciding that the supply of vouchers for consideration must be a supply of services since it is not a supply of goods,2 and under the EU VAT Directive, a supply of services is “any transaction which does not constitute a supply of goods”.3 In this Subsection, I will explain why I think this case should not be applied widely.

The Astra Zeneca-case case precedes the MacDonalds Resorts-case4 I described earlier (the case about ‘points rights’) by about five months only but it was ruled by a different chamber of the CJEU, which may also explain the different outcome. Also, from the facts of this later case (and under the rules applicable in the specific taxable period), it transpires that the business that supplied the vouchers for consideration to its employees actually incurred VAT on the purchase of the vouchers, which is not commented on by the CJEU.5 In view of what I established so far in this Chapter, I can only come to the conclusion that this ruling does not seem to fit comfortably in the line of the CJEU’s other judgments on this topic.

The Advocate General in in the Astra Zeneca-case acknowledges that the (VAT) chain in this whole transaction is very complex but that there is just one payment of the tax. The VAT on the goods or services purchased from the retailer is incorporated in the voucher and, at the point at which he receives it, providing goods or services in exchange, the retailer ‘completes the circle’ and pays the VAT collected in supplying the voucher to the intermediary over to tax authorities.6 Be that as it may, the Advocate General then dismisses the view that the provision of vouchers falls outside the scope of VAT, arguing that it has the following drawbacks:

First, the Advocate-General argues that this view can only be accepted for the situation in which the consideration for the provision is exactly the same amount as the purchase price of the vouchers. According to the Advocate General, if the supplier of the voucher makes a ‘profit’, this would be an indication that added value is created for the purpose of VAT legislation, which would give rise to liability to pay tax.7 I agree, but in my view the ‘profit’ or margin between the purchase price and the sales price of a voucher would constitute the consideration for a separate taxable transaction related to the voucher (e.g. marketing, operating, supporting or handling the voucher scheme), whilst the supply/transfer of the actual voucher would remain untaxed, as I explain in Section 9.5.2.11.

Second, the Advocate General argues that the person that purchases and uses the voucher is ultimately liable for the VAT, which can only be the case if this is not ‘hidden’ in the price of the voucher.8 The Advocate General argues that the user (purchaser) of the voucher can only be liable for the VAT if the supply of that voucher is actually subject to VAT.9 I disagree. The only transaction that needs to be taxed is the supply of goods or services that is ‘paid for’ with a voucher. And the VAT ‘hidden’ in the value of (or: paid for issuing or supplying) that voucher is also used to pay for the VAT on that transaction. The value of a voucher is (or can be) a gross (i.e. VAT inclusive) amount if it is redeemed for a taxed supply of goods or services. Taxing the supply of the voucher as well as the supply of the goods or services that are paid for using the voucher would, in my view, lead to double taxation: VAT is remitted to the tax authorities twice: once for the supply of the voucher and once for the supply of goods or services. However, there is only one supply that leads to taxable consumption, and that is the supply of the goods or services. Only that transaction should, in my view, be subject to VAT.

This means that in my view, the CJEU’s decision in the Astra Zeneca-case that issuing or supplying a voucher is a service that is subject to VAT, should not be applied widely. It is not in line with other CJEU case law on the VAT treatment of voucher transactions, nor with the economic and commercial reality of voucher transactions or the purpose of EU VAT (taxing expenditure on local private consumption). The economic and commercial reality of voucher transactions is that vouchers as such are not the object of the transactions, and therefore transferring vouchers should not be a taxable supply. Also, as explained above, even though there is expenditure when a voucher is sold, this expenditure does not lead to consumption at the time of making that expenditure, and no taxable supply is made (under current law, this is different for the transfer of an SPV). If anything, also under the purpose of EU VAT, the expenditure should be treated as prepayment for a future supply or a deposit that can be used for a future supply.