VAT treatment of vouchers

The EU Council has deemed the provisions in the current EU VAT Directive (Directive 2006/112/EC) as applicable to vouchers are not clear or anywhere near substantial enough to ensure consistent VAT treatment between Member States.

As a result, distortions could appear in the market between Member States and as well as potential instances of double taxation or tax avoidance. This could be the consequence, for example, of the difficulty in identifying which transaction in the voucher process triggers a tax point that establishes when VAT become due – the issuing of the voucher or when the voucher is redeemed?

These shortcomings, coupled with other recent developments – such as the updates relating to electronically supplied services – prompted the Council to consider introducing provisions for the common treatment of vouchers across the EU. Consequently, the Council adopted a Directive (Directive 2016/1065) – the EU Vouchers Directive – which comes into force on 1 January 2019 and thus applicable to vouchers issued after 31 December 2018.

Needless to say, the underlying VAT principles will apply to transaction involving vouchers. In fact, one can say there should generally be no difference in ultimate VAT charged on a given transaction – regardless if one pays for that good or service using cash, credit cards or vouchers.

It must be pointed out that the EU Vouchers Directive excludes any form of payment instruments as well as discounts without right to claim a good or service, admission or transport tickets, payment instructions nor postage stamps.

What is captured by this Directive?

Firstly, given that the treatment depends on the characteristics of the given voucher, it is important to define a voucher. In terms of the EU Vouchers Directive, a voucher, be it of a physical form or an electronic form, represents an obligation on the part of the vendor “to accept it 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”.

“Vouchers”, in this context, include gift cards and in practice include simple book tokens, gift vouchers and even electronic vouchers purchased from specialist businesses.

Furthermore, the EU Vouchers Directive distinguishes between two types of vouchers – (i) a Single Purpose Voucher and (ii) a Multi Purpose Voucher.

Single Purpose Voucher (SPV)

For the purposes of the new EU regulations on vouchers, an SPV is characterised by a certainty regarding its value and subsequent VAT charge as well as place of supply of the underlying transaction. Consequently, the VAT treatment for this type of  voucher is determined by referring to the said place and nature of the supply. Therefore, the issuing of an SPV (and any subsequent transfer) is a taxable transaction in itself.
This is because the Vouchers Directive regards the issuing of an SPV as being the supply of the goods or services to which the single-purpose voucher relates. The ensuing redemption is, then, not regarded as an independent transaction and therefore attracts no further VAT obligations.
An example of an SPV is a service provider selling vouchers (either directly or via an agent) which carry an entitlement to a defined good (example furniture or clothes) that is to be supplied to the holder of that voucher.

Alternatively, if the voucher is issued by a taxable person acting on behalf of another taxable person, the first taxable person – the intermediary – is not considered as acting in the underlying supply. Also, the consideration received by a person not acting is his own name on the transfer of the voucher is not subject to VAT. The only VAT obligation attributable to this intermediary is that of intermediary, distribution and/or marketing services.

Multi Purpose Voucher (MPV)

In terms of the EU Vouchers Directive, what is not an SPV shall be deemed to be an MPV. Hence an MPV entitles the holder to receive goods or services where these goods or services (or the territory in which such goods/services are to be supplied and taxed) are not sufficiently identified.
As a result, VAT cannot be determined with certainty at the time the voucher is issued – as for example is the case with prepaid credit vouchers which could be used to purchase either a telecommunications service (standard rated for VAT) or to pay for public transport (where a reduced rate may apply).

Consequently, VAT can only be accounted for when vouchers are redeemed and, therefore, when the goods or services to which the voucher relates are supplied. At this point, VAT is charged on the taxable amount that is taken to be either;

a. if the redeemer knows how much was paid for the voucher, that amount (net of any amount of VAT due on the supply); or

b. if the redeemer does not know how much was paid for the voucher, the face value (net of any amount of VAT due on the supply), and proportionally the same where the voucher is partly redeemed for goods or services.
In the case of only partial use of an MPV, the value considered as taxable is that of the consideration or the monetary value, less the amount of VAT relating to the goods or services supplied.
As with SPVs, the Directive contemplates the issue relating to the distribution of the vouchers through a chain of distributors before arriving in the hands of the final consumer. Although the underlying transaction is not to be taxed until the eventual supply of goods or services takes place, the Directive once again anticipates that the commercial distribution of an MPV is, in itself, a supply of a taxable service which is independent of the underlying supply.

Therefore, when an MPV changes hands in a distribution chain, VAT will be due only on any separate supply, for consideration, of intermediary / distribution / promotion services incurred by the third part distributor/s.

The Directive does not deal with non-redemption of MPVs, where the issuer retains the consideration paid for the MPV.

Applicability of vouchers to “utility tokens”

Certain tokens issued during token generating events (including ICOs) grant holders the right to redeem such tokens against goods/services at a future date. Many times, at the point the tokens are granted, it may not possible to determine the following:
• The type of goods/service to be utilised in exchange for the tokens (specifically when the token entitles the holder to redeem against various goods/services); and/or
• The nature of the person to eventually utilise the service (i.e. whether a taxable person or otherwise); and/or
• The jurisdiction where the person utilising the token will be established for VAT purposes.

On this basis, it is anticipated that most utility tokens should probably be considered asMPVs for VAT purposes.


Member States have until 31 December 2018 to transpose the directive into national legislation, with the revised rules coming into effect for vouchers issued after that date. Malta has transposed the implementation of the directive into national legislation by way of legal notice 348 of 2017. Furthermore, by 31 December 2022, the EU Commission is to prepare an assessment report on the implementation of the Vouchers Directive.

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