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Taxation and Customs Union

VAT treatment of Vouchers

The European Commission has compiled a report on the results of the public consultation entitled "Modernising the Value Added Tax treatment of Vouchers and related issues". The Report is now available in .pdf format. The responses are available upon request. See our contact page.

The consultation

In November 2006 the Commission's Taxation and Customs Union Directorate-General made available on its website a consultation paper seeking views from the public and business. It described the inconsistencies in the VAT treatment of vouchers between Member States. It explained that these inconsistencies may offer opportunities for tax avoidance or may raise situations of double, or non-taxation (for cross-border transactions).

After a description of several kinds of vouchers the consultation paper analysed some possible options for their VAT treatment taking into account such fundamental elements as the place and the time of supply and the taxable amount. Also the dividing line between vouchers and means of payment was analysed in order to avoid unwelcome distortions.

Finally a section dedicated to the European Court of Justice case-law was included to clarify the status quo of the interpretation of the current legal framework as set out in the Sixth VAT Directive (Directive 77/388/EEC, now Directive 2006/112/EC).

The paper was addressed to stakeholders such as companies who issue or deal in vouchers of all kinds, and of businesses operating or using payment systems as well as their advisors.

The purposes of consulting the public on this issue were:

  • to check the accuracy of the analysis;
  • to gather relevant feedback; and
  • to assist the Commission's services in developing their thinking on the subject.

Conclusions of the consultation

More than 30 responses were received from companies and associations in several different Member States.

Unfortunately, the technical complexity of this sector is not conducive to a comprehensive summing up of the outcome but in brief:

  • One issue raised was the competitive balance between some new forms of vouchers and the classic means of payment. The neutrality of treatment between systems having the same functionalities is considered as fundamental and any change in the legislation should not disregard this principle.
  • The majority of the responses agreed with the analysis and the definitions of various kinds of vouchers put forward by the Commission and also appreciated the options proposed with the Consultation.

All of them very much welcomed the initiative of the Commission arguing that:

  • there is a real need to clarify the VAT treatment of vouchers in a market which, despite the misunderstanding or the misapplication of the VAT rules, is constantly increasing and constantly evolving;
  • the current divergence of national rules and differences in the application of the Directive affect the development of this peculiar market.

Finally any change in the VAT treatment should take into account the time needed by business for the adaptation of systems. A transitional period between the publication of the law and its entry into force is considered as ideal.