9.3.2 The difference between a right as such and the right to a future supply

With regard to the supply of a right ‘as such’, even if the ‘underlying goods or services’ are not used, the right to do so is actually transferred to the purchaser. Examples of these ‘rights as such’ are intellectual property rights (e.g. a patent), certain subscriptions and memberships, fishing rights/permits and the lease of moveable and immoveable property. Because the transfer of the right ‘as such’ is the object, or aim, of a transaction, the supply of that right is a VAT taxable transaction.1 The person that obtains these rights, pays for these ‘rights as such’, and not for (based on the above examples) the actual number of patented products made and sold,2 the time he actually makes use of the facilities of the golf course at the golf club that he is a member of, the (amount of) fish that he actually catches or the time that he actually uses the (relevant part of) the building. These types of rights can also be worded as follows: having the right to use goods and/or services and/or intellectual property rights (or the right to disallow the use of goods and/or services and/or intellectual property by others) during an agreed period of time.

This is different from the right to a future supply. In that case, the ‘right’ is not the object of the transaction. The transaction embodies the promise that the recipient will receive an agreed supply in the future. Payment and supply are separated in time. Therefore, it is also possible to supply the right to the future supply of a right, e.g. the lease of an apartment that commences in six months’ time. A cinema ticket embodies the right to be admitted to the cinema, often on a specific date and during a specific time to see a specific film. A book token embodies the right for the holder to use it as (part) payment for certain specific goods or services to be supplied by (a) specific supplier(s). The actual (future) supplies are the admission to the cinema and the supply of the book. Payment and supply are separated. If a person buys a cinema ticket at the cinema for a film that will play shortly, and he subsequently enters the building to see that film, this temporal separation does not exist, and it becomes even more clear that the payment is actually made for the admission to the film. Buying that same ticket online two days in advance does not change that.

The difference between the supply of a ‘right as such’ and other rights to obtain or use goods or services in the future can be further explained as follows. A gym membership or the lease of a car costs a certain amount, which can be paid in advance. The (residual) value of this membership or the use of the car does not depend on the actual use, but on the time elapsed between the beginning and the end of the period in which the right can be exercised.3 By this I mean that if it would be possible to transfer the membership or the lease half way the contractually agreed period, the price for the remaining time is not dependent on the actual use so far4 or the foreseen future use of the transferred right (in and by itself). This is different for, for example, a right to come to the gym and use the facilities for a fixed number of times (e.g. during a month) or the right to catch a specific amount of fish (per year). The (residual) value of these rights depends on the actual use or consumption of those rights until the moment of the agreed transfer of that right.5 With regard to the latter type(s), if these rights are transferred, the object of that supply is not the right ‘as such’, but the (remaining) actual (or possible) use or the actually agreed predetermined ‘units’6 that are to be supplied.

As an example, in infringement procedures against the UK and Ireland7 the CJEU has held that the use of roads on payment of a consideration (toll) should not be qualified as ‘the letting of immovable property’ (i.e. the supply of a right ‘as such’) but rather as ‘offering the possibility of making a particular journey rapidly and more safely’ (i.e. the actual use of the toll road), because the duration of the use of the road is not a factor taken into account by the parties, in particular in determining the price. This makes clear that ‘time’ or ‘duration of use’ is a relevant factor for the supply of ‘rights as such’ but not for the supply of ‘rights to a future supply’.

Further examples of the supply of rights to future supplies are: granting someone the right to choose items (goods) from a long list of goods to be supplied to him in the future,8 supplying someone points that he can accumulate in order to exchange/redeem those points for a (future) stay in an accommodation of his choice from the list of available accommodations.9 These supplies are not subject to VAT, because they are not (yet) complete (because the taxable supply or ‘chargeable event’ has not yet taken place). If the underlying supply itself is not (or insufficiently well) defined, the payments for these rights do not trigger a VAT liability either.10

I have summarised the above in the following two diagrams, which I explain below:

The value of a ‘right as such’ depends on the time elapsed between the origination of the right and the end of it. For example, the transfer of an intellectual property right, a gym membership or the lease of a property all start at an agreed point in time and end at a later point in time. Whether linear or not, the elapsed time between origination and end determines the value of that right at that time. It is not determined by the actual use of the intellectual property, the gym or the property. Obviously, external circumstances may affect pricing as well, as may actual use if, for example, the property becomes less valuable through wear.

On the other hand, the value of the right to an underlying (future) supply is not affected by time but only by the actual use of the underlying supply. A concert ticket purchased a month before a concert is not worth half the original price two weeks before the concert, just because time elapsed. If anything, other external market influences may have increased the price of the ticket. And as soon as the ticket is used to gain entry to the concert, the ticket becomes ‘worthless’, except for sentimental value or, for example, for old concert ticket collectors. The same rationale applies to the value of a bundle of units, e.g. a 10-journey bus ticket11 or a data bundle for mobile phone use,12 where the ‘bundle’ decreases in value not because of time (unless of course there’s a time limit to the use of the units) but because of actual use of the units included in the bundle.

The above also applies to options, i.e. contracts which give the holder of the option the right, but not the obligation, to buy or sell an underlying asset or instrument at a specific price on a specified date, depending on the form of the option. In my view, these options qualify as ‘rights as such’ because, even though time is a relevant factor in these types of agreements, unlike other ‘rights as such’, there is no main rule that says that these options decrease in value as a result of time elapsing. However, the trade in options is a trade in those rights as such, for a consideration that is separate from intrinsic value of the underlying asset or instrument, also because the premium is paid even if the option is not exercised (i.e. when the option expires). This is in line with the other difference between ‘rights as such’ and rights to future supplies: the supply for a ‘right as such’ is a taxable transaction that is subject to VAT because the taxable event is the transfer of that right in itself. This is different for the supply of the right to a future supply: in that case, even though a right is transferred for consideration, it can be argued that no taxable event has taken place at the moment of the transfer of that right. Also, based on the principle that only consumption should be subject to VAT,13 the supply of a right as such actually embodies for the purchaser a benefit which would enable him to be considered consumer of a service,14 whereas the supply of a right to a future supply does not (yet). As mentioned before, if certain criteria are met, the payment of the consideration for a right to a future supply is considered a ‘prepayment’, which triggers VAT to become payable before the relevant taxable transaction has taken place.

For vouchers, the above means in my view that payment for a voucher is either a prepayment for a future supply,15 triggering VAT to become payable at the moment the consideration for issuing the voucher is received, or a deposit that can be used as consideration for a future supply,16 postponing the VAT liability to the moment of redemption of that voucher, as I will explain in this Chapter. This is only different for a specific type of voucher, the so-called ‘single-purpose voucher’17 or ‘SPV’ because under Article 30b of the EU VAT Directive, each transfer of a single-purpose voucher made by a taxable person acting in his own name shall be regarded as a supply of the goods or services to which the voucher relates.