VAT and vouchers

The CJEU has held that the question whether vouchers are single-purpose vouchers or multi-purpose vouchers should be determined by reference to the terms of their issue, irrespective of how they may be used, contrary to their conditions: M-GbR v Finanzamt O (Case C-68-23). As such, voucher codes issued for use only by German residents could in principle qualify as single-purpose vouchers on the basis that the place of supply was known at the time of issue, even if in practice (and contrary to the terms of issue of the voucher codes) they were acquired and used by persons outside Germany.

Background

There is a significant difference in treatment of vouchers for VAT purposes depending on whether they are “single purpose vouchers” (SPV) or “multi-purpose vouchers” (MPV). An SPV is a voucher where the place of supply of the goods or services to which the voucher relates and the VAT due on those goods or services are known at the time of issue of the voucher (Article 30a(2) of the VAT Directive). An MPV is a voucher other than a single-purpose voucher (Article 30a(3)).

The transfer of an SPV is treated as a supply of the goods or services to which the voucher relates and the later actual provision of goods or services is not regarded as an independent transaction (Article 30b(1)). Conversely, in the case of an MPV, only the actual provision of the goods or services to which it relates is subject to VAT, but not each preceding transfer of that voucher (Article 30b(2)).

This case concerned the provision of vouchers for an online store, X store. M-GbR sold X vouchers codes via its online shop. The voucher codes allowed the purchaser to load his or her X user account with a certain nominal value in euros, after which digital content could be purchased by the account holder in the X store. X cards were distributed to various intermediaries by Y, a UK entity, which owned the X store and they were distributed with different country codes. The code DE was intended for customers in Germany and a German X user account.

M-GbR purchased X cards from suppliers who were not established in the UK or Germany, but in other Member States. They had previously acquired the X cards from Y. M-GbR treated the voucher codes as MPVs and did not account for VAT either on the acquisition of the X cards nor their transfer to end customers. The German tax authorities took the view that the X cards were SPVs such that VAT was chargeable on the issue or transfer of those vouchers.

CJEU decision

It is a requirement for an SPV that both the place of supply and the VAT liability on the supply is known at the time of the issue of the voucher. M-GbR argued that, whilst the vouchers in this case were intended only for German users, the identity and place of residence of voucher users was not known with certainty. In particular, Y did not check customer data when X user accounts were opened and when they were subsequently used. In addition, a large number of customers residing outside Germany opened a German X user account, in particular because of price advantages, and also purchased X cards from M-GbR with the ‘country’ code DE.

However, the CJEU has rejected that argument and held that it is not possible to take into account the fact that final consumers, residing outside German territory, use X cards, purchased from it with the identifier 'country' DE, disregarding the conditions of use of those vouchers. The proper VAT classification of a transaction cannot depend on abusive practices.

Accordingly, if the VAT liability of supplies which could be obtained from the X store with the vouchers were known, then the vouchers would be SPVs. That was a matter for the domestic court to determine.

The Court was also asked to determine whether any VAT liability on transfers of the vouchers through intermediaries could arise if, contrary to that conclusion, the vouchers were MPVs. Whilst it is normally only at the time of the exchange of an MPV for goods or services that VAT is known and charged, Article 30(b)(2) provides that, “Where a transfer of a multi-purpose voucher is made by a taxable person other than the taxable person carrying out the transaction subject to VAT pursuant to the first subparagraph, any supply of services that can be identified, such as distribution or promotion services, shall be subject to VAT.”

It is unsurprising, therefore, that the CJEU has confirmed that where an MPV is the subject of one or more transfers through a distribution chain extending over the territory of several Member States before it is exchanged by the final consumer, then there may be a separate supply of services, such as distribution or promotional services, which is distinct from the exchange of that voucher for goods or services. In those circumstances, the distribution or promotional services for the benefit of the taxable person who, in consideration for the vouchers, actually provides digital content to the end consumer may attract VAT. Again, it was a matter for the domestic court to determine if M-GbR made any such supplies when reselling the vouchers.

Comment

The Court's decision is a helpful confirmation that if the terms and conditions of a voucher prohibit its use outside the intended territory (and only one VAT rate could apply to the actual goods/services it can be redeemed for), then the voucher should qualify as an SPV and it is not necessary that the issuer carry out considerable due diligence to ensure that those terms are complied with.