The EU VAT Treatment of Vouchers (FM nr. 157) 2019/10.3.2:10.3.2 How to determine whether a supply that is part of a composite supply (or: an element in a composite supply) that is made for consideration, is made free of charge?

The EU VAT Treatment of Vouchers (FM nr. 157) 2019/10.3.2

10.3.2 How to determine whether a supply that is part of a composite supply (or: an element in a composite supply) that is made for consideration, is made free of charge?

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

It is relevant to determine whether the elements to a multiple-element supply that is made for consideration, are all considered to be made for consideration. If this is the case, the consideration will have to be apportioned to all elements. However, if this is not the case, the VAT treatment of the elements that are supplied free of charge depends on a number of different factors.

Elements in a multiple-element supply that are advertised as being supplied for free are, as a general rule, supplied free of charge. The ‘legal reality’ should be the basis for determining the VAT treatment of a transaction, unless economic and commercial reality deviate from this legal reality.

In the following cases, multiple-element supplies including an element that is advertised as supplied free of charge, may be treated as if all elements are supplied for consideration, depending on the economic and commercial reality of these transactions:

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Supplies here the ‘free’ element is included in the composite supply through absorption or amalgamation;

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Supplies where the ‘free’ element has an absolute and relatively high value;

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Supplies that are so-called ‘combination deals’;

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Supplies where the customer has to accept the ‘free’ supply and has no choice not to accept it; and

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Supplies where the ‘free’ element is an explicit part of a negotiated deal.

This means that unless any of the above situations occurs, the element to a composite supply that is advertised as ‘free’ is actually supplied for no consideration. This raises the question of how to treat free supplies from a VAT perspective, but before I answer that question, some different question should be answered.

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