On 27 June 2016, the Council of the European Union (EU) issued a press release announcing that it has adopted a directive aimed at increasing legal certainty for transactions involving vouchers by harmonising national value added tax (VAT) rules in this area. The said directive sets out to reduce the risk of mismatches in national tax rules leading to double taxation, non-taxation or other undesired fiscal consequences. This can happen where a voucher is issued in one Member State and used in another particularly where vouchers are traded, due to the fact that currently, the VAT treatment of vouchers is not unified at EU level. As a result, each Member State’s domestic applicable laws must be applied to determine the VAT treatment of vouchers.
The Directive defines a voucher as an instrument that may be accepted as consideration or part consideration for a supply of goods or services and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument. Furthermore, the Directive divides voucher into single-purpose vouchers (SPVs) and multi- purpose vouchers (MPVs) and sets rules to determine the taxable value of transactions in both cases.
SPVs are defined as vouchers where the place of supply of the goods or services to which the voucher relates and VAT due on those goods or services is known at the time of issue of the voucher. This is in line with the general principle that VAT is chargeable at the moment that the prepayment for a future supply is received and that all relevant information concerning this taxable supply is known. Consequently, VAT will be due on each transfer of the voucher (i.e. this is treated as a supply of the goods or services which the voucher represents), unless the SPV relates to a VAT- exempt good or service. An example of a SPV is a Eur3 voucher for coffee to be used in a particular chain of coffee shops located in a particular EU Member State.
A MPV is defined as any voucher which is not a SPV. The real nature of the transaction, the place of supply and the amount of VAT due is not known in the case of a MPV and a MPV can be issued for goods or services subject to different VAT rates. Therefore, the transfer of such voucher will not be considered as a taxable event until the actual goods or services are identified and handed over in return for the acceptance of the voucher. No VAT will be due when the voucher is transferred through the supply chain and the chargeable event will occur only when and if the MPV is used and. The value on which VAT should be accounted for is either the price paid by the consumer, or if that is not known, the face value of the voucher, less the amount of VAT relating to the goods or services supplied. An example of a MPV is a hotel voucher valid in different Member States which can be subject to different VAT rates.
Member States have until 31st December 2018 to transpose the Directive into national legislation its provisions become applicable on 1 January 2019. The Directive’s provisions will only apply to vouchers issued after that day. It should be noted that Malta has already issued legislation contained in LN348 of 2017 which implements the provisions of this directive.