1.5 Relevance of the research

For the EU, VAT in itself is relevant for various reasons. The common Value Added Tax (VAT) system plays an important role in the European Union’s Single Market. It was originally put in place to do away with turnover taxes which distorted competition and hindered the free movement of goods and to remove fiscal checks and formalities at internal borders.1 It is a major and growing source of revenue in the EU,2 raising almost EUR 1 trillion in 2014, corresponding to 7% of EU GDP.3 One of the EU’s own resources is also based on VAT. EU Member States should for this purpose all pay 0.3% (on average) of the harmonised VAT assessment bases determined according to Union rules.4 This means that the correct application of the EU VAT rules can have a relevant financial impact.

Also, under one of the fundamental principles underlying the EU VAT system (the principle of ‘neutrality’), similar transactions should be treated equally for VAT purposes.5 For voucher transactions as well as the underlying promotional activities, this means that where a business decides to apply a certain promotional activity (involving vouchers), the VAT treatment thereof should be the same in all EU Member States but also the VAT treatment of similar promotional activities should be the same. Given the abundance of preliminary questions about the VAT treatment of various promotional activities (or transactions that apply the same principles as promotional activities) that have been referred to the CJEU,6 it seems that neutrality has not been fully achieved yet.

The EU VAT rules did, until the adoption of the rules that will be applicable from 1 January 2019, not provide for specific rules on the treatment of transactions involving vouchers. Using a voucher in a taxable transaction can have consequences for the taxable amount, the time of a transaction and even in certain circumstances, the place of taxation. Uncertainty about the correct tax treatment can be problematic for cross-border transactions and for chain transactions in the commercial distribution of vouchers. The absence of common rules has obliged Member States to develop their own solutions, inevitably uncoordinated. The resultant mismatches in taxation cause problems such as double or non-taxation but also contribute to tax avoidance and form barriers to business innovation. Moreover, increased functionality in vouchers has made the distinction between vouchers and more generalised payment instruments less clear.7 The VAT rules that are applicable from 1 January 2019 do not apply to all types of vouchers and do not solve all relevant issues, as I will demonstrate in this research.

Certainty enables businesses to perform well, grow and thrive. A stable business environment requires certainty about how the relevant rules should be applied. Ensuring legal certainty is one of the EU VAT system’s objectives.8 From the above it is clear that currently, there is a lack of legal certainty regarding the VAT treatment of many promotional activities. This research aims at providing more unambiguous suggestions for the VAT treatment of promotional activities where application of the current EU VAT rules fails to do so. Where EU VAT rules and CJEU case law are not in line with the basic features or the fundamental principles underlying the EU VAT system, I will provide alternatives that should bring the VAT treatment of those activities more in line with these features and principles.