9.8.5.2 Arguments against the application of a VAT exemption

In the EU Directive on Payment Services, paper based vouchers and services based on instruments that can be used to acquire goods or services only in the premises used by the issuer or under a commercial agreement with the issuer either within a limited network of service providers or for a limited range of goods or services, are explicitly excluded from the application of that Directive.1 It is clear from this that the European Commission does not consider services based on vouchers to be ‘payment services’. The Commission does not qualify vouchers as ‘electronic money’ either. The EU Directive on the taking up, pursuit and prudential supervision of the business of electronic money institutions2 does not apply to monetary value stored on specific pre-paid instruments, designed to address precise needs that can be used only in a limited way, because they allow the electronic money holder to purchase goods or services only in the premises of the electronic money issuer or within a limited network of service providers under direct commercial agreement with a professional issuer, or because they can be used only to acquire a limited range of goods or services. An instrument should be considered to be used within such a limited network if it can be used only either for the purchase of goods and services in a specific store or chain of stores, or for a limited range of goods or services, regardless of the geographical location of the point of sale. Such instruments could include store cards, petrol cards, membership cards, public transport cards, meal vouchers or vouchers for services (such as vouchers for childcare, or vouchers for social or services schemes which subsidise the employment of staff to carry out household tasks such as cleaning, ironing or gardening), which are sometimes subject to a specific tax or labour legal framework designed to promote the use of such instruments to meet the objectives laid down in social legislation. Where such a specific-purpose instrument develops into a general-purpose instrument, the exemption from the scope of this Directive should no longer apply. Instruments which can be used for purchases in stores of listed merchants should not be exempted from the scope of this Directive as such instruments are typically designed for a network of service providers which is continuously growing.

This means that voucher transactions are not considered payment services nor services concerning electronic money, which are typically VAT exempt. This could, however, be different for certain types of instruments that can be used to store monetary value that can be spent without limits that are based on business or product/services promotion schemes. I will elaborate on this below.

In a proposal for a Regulation regarding the treatment of insurance and financial services, the Commission considers services that grant the right or the option of receiving goods or services not to have the specific and essential character of an exempt service.3 Issuing or distributing vouchers that embody rights is, in my view, not VAT exempt because these activities can be qualified as ‘promotional activities’, ‘the supply of the right to preferential treatment’, ‘distribution services’ or ‘sales support’4 but not as a VAT exempt financial activity.

Also, the CJEU has not explicitly ruled or mentioned that an exemption applies to transactions regarding vouchers in any of the cases referred to it for a preliminary ruling, even though various cases dealt with the VAT treatment of vouchers.5 And it is established case-law that the terms used to specify the exemptions referred to in Article 135(1) of the EU VAT Directive are to be interpreted strictly.6

At first sight, vouchers that are issued by businesses that do not accept them in return for the supply of goods or services, but that reimburse the businesses that have agreed to accept the vouchers closely resemble ‘cheques’ or other means of payment. Examples of this type of voucher are film vouchers, book tokens and luncheon vouchers. Some countries, such as the Netherlands, used to treat transactions concerning these vouchers as VAT exempt.7 Be that as it may, in my view, the main purpose of issuing these vouchers is either to promote certain lines of business (e.g. cinemas, book shops or participating restaurants) or to provide (often tax friendly) employee benefits, expense management or loyalty schemes.8 Even though they are ‘as good as money’, they can only be ‘spent’ at participating businesses. They cannot be compared to credit cards, because no credit is granted by the businesses issuing the vouchers. In my view, they are not ‘cheques’ as referred to in Article 135(1)(d) of the EU VAT Directive either, because, as I explained, it is not the provision of a financial service that is the main purpose of the issuers of the voucher. According to the CJEU, all transactions set out in subparagraphs b to g are, by their nature, financial transactions.9 The CJEU has also made clear that if a single, composite service consists of different elements, where the exempt part of the transaction is not the main element that is made more attractive by one or more ancillary elements, but where the different (exempt and non-exempt) elements are considered to be so closely linked that they form, objectively, a single economic supply which it would be artificial to split and where the elements must be placed on the same footing, the transaction as a whole cannot be considered exempt.10 Therefore, transactions concerning vouchers are not VAT exempt.11

Lastly, the term ‘deposits’ as referred to in Article 135(1) of the EU VAT Directive does not, in my view, refer to deposits that are paid as security for a transaction, but to transactions regarding deposit accounts.12 The term ‘deposit’ as a security by the CJEU is different from the term ‘deposit’ in Article 135(1) in other languages than English.13 The exemption for transactions concerning deposits can therefore, in my view, not be applied to transactions concerning vouchers.