The EU VAT Treatment of Vouchers (FM nr. 157) 2019/5.4.5.0:5.4.5.0 Inleiding

The EU VAT Treatment of Vouchers (FM nr. 157) 2019/5.4.5.0

5.4.5.0 Inleiding

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Elida Gibbs was a UK based subsidiary of Unilever that manufactured toiletries. To promote retail sales of its products, Elida Gibbs operated both the ‘money off scheme’ as well as the ‘cash back scheme’ I described above. Elida Gibbs initially remitted VAT on the full amount of the consideration received from the (in my earlier examples) wholesalers for its sales to these wholesalers. At some point, Elida Gibbs decided that this was not correct, and asked for a refund of overpaid VAT to the amount of the VAT on the value of the considerations received from the wholesalers less the amounts it had to pay out for redemption of the vouchers by the retailers (under the ‘money off scheme’) and by the purchasers of the goods (under the ‘cash back scheme’). In essence, Elida Gibbs considered these payments as ‘retroactive discounts’ and rebates, which reduced the (original) taxable amount.1 The Commissioners rejected the claims, taking the view that there was no retroactive discount.

In a diagram, Elida Gibbs’ view can be illustrated as follows (Diagram 5 for the ‘money off scheme’ and Diagram 6 for the ‘cash back scheme’), where Elida Gibbs is symbolised by ‘M’:

Afbeelding 7

Afbeelding 8

Elida Gibbs challenged the Commissioners’ rejection. The relevant court, entertaining doubts as to the interpretation of the relevant Community (now: Union, JB) provisions, referred a number of questions to the CJEU for a preliminary ruling.

The CJEU ruled in favour of Elida Gibbs, allowing Elida Gibbs to decrease the taxable amount for its sales (to the wholesalers) with the amount paid to the retailers (under the ‘money off’ scheme) or the customer (under the ‘cash back’ scheme). In my view, a pivotal part of the ruling can be found in paragraph 31 of the ruling,2 in which the CJEU states the following:

“It is true that that provision (the current Art. 95 of the EU VAT Directive, JB) refers to the normal case of contractual relations entered into directly between two contracting parties, which are modified subsequently. The fact remains, however, that the provision is an expression of the principle, emphasized above, that the position of taxable persons must be neutral. It follows therefore from that provision that, in order to ensure observance of the principle of neutrality, account should be taken, when calculating the taxable amount for VAT, of situations where a taxable person who, having no contractual relationship with the final consumer but being the first link in a chain of transactions which ends with the final consumer, grants the consumer a reduction through retailers or by direct repayment of the value of the coupons. Otherwise, the tax authorities would receive by way of VAT a sum greater than that actually paid by the final consumer, at the expense of the taxable person.”

Before I explain why, in my view, this ruling and a subsequent CJEU rulings on some of the exact same points of law3 are not entirely in line with the EU VAT system (even though they are based on ‘economic reality’, without the CJEU explicitly saying so), I will first elaborate on some relevant facts as well as the principles applied in these cases.4,5

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