Are you aware of all the implications when a customer "pays" in your business with a voucher? How do you need to calculate and report your VAT turnover? Are you considering issuing vouchers yourself, and do you want to be sure that you are not paying too much VAT, or paying it too early? Can you sometimes not see the wood for the voucher-shaped trees?
This is understandable, because the applicable rules are complex. The new rules for the VAT processing of vouchers, transposing European Directive 2016/1065 into the Belgian VAT Code, were approved in the Chamber on 31 January. These new rules came into force on 1 January 2019. The VAT administration had already provided clarification of the new rules in a circular drawn up in the form of a FAQ list.
The concept of 'voucher'
Both the legal text and the circular first clarify what is actually covered by the term 'voucher'. This definition is intended to differentiate vouchers, from discount coupons on the one hand, and payment instruments on the other. A voucher is defined as:
"an instrument accepted by certain suppliers as a consideration, in whole or in part, for the supply of certain goods or services"
This differentiates a voucher from a (general) payment instrument. The new rules only pertain to vouchers which are sold. Vouchers given out free of charge (which are in fact pure discount coupons) are therefore not covered by these new rules.
The following instruments, among others, should therefore be considered as vouchers:
- meal vouchers and 'ecocheques';
- cinema vouchers;
- wrist bands with which food and drink can be bought at a festival;
- vouchers which can be used to pay for a stay in various hotels, etc.
The following instruments are not vouchers within the meaning of the new VAT regime:
- saving cards;
- discount coupons;
- prepaid payment cards and prepaid telephone cards;
- vouchers that entitle the holder to a free product given away to promote a new product, etc.
SPV or MPV
Vouchers are then divided into two categories, the single-purpose voucher (SPV) and the multi-purpose voucher (MPV).
A voucher will be considered an SPV if, at the time of issue, it is known:
- where the transaction will take place in terms of VAT (i.e.: in which EU Member State, so that it can be calculated which VAT is due)
- what the applicable VAT rate is
When one (or both) of these conditions are not met, it is an MPV. A voucher for an overnight stay with breakfast in a hotel in Belgium will therefore have to be considered as an SPV. Both the overnight stay and breakfast are subject to the 6% VAT rate. If, for example, you can stay in a hotel in the Netherlands with the same voucher, the voucher will have to be considered as an MPV. The same applies if the voucher entitles you to a package consisting of an overnight stay, breakfast and a gourmet dinner, in a Belgian hotel, to be chosen out of a selection of twenty hotels. Indeed, the dinner is subject to the 12% VAT rate and it cannot be known in advance how the hotel will divide the package between overnight stay with breakfast on the one hand and the dinner on the other.
The moment at which the VAT is incurred varies depending on whether the voucher is considered an SPV or an MPV. In the case of an SPV, VAT is incurred at the time of issue. Any subsequent transfer of an SPV before the final time it gets redeemed will also render the VAT incurred and payable. The final time the voucher for goods and/or services is redeemed will not result in incurred VAT. If an SPV is issued by a person who is not the supplier of the goods/services for which the voucher is issued, the supplier will be deemed to supply the goods/services to the issuer of the voucher at the time the voucher is redeemed. For example, if a supermarket chain sells its own vouchers for access to an amusement park of its choice in Belgium, VAT is incurred at the time of issue (the Member State of consumption and VAT rate are known). If the voucher is subsequently redeemed, the amusement park selected provides a (VAT-liable) service to the supermarket chain, for which it has to issue an invoice to the latter. Note that the actual redemption of the voucher by the visitor is therefore not subject to VAT. This means that the processing of received vouchers in the cash registers of a wide range of companies deserves special attention!
The VAT processing of an MPV is the diametric opposite; the issue and subsequent transfers of the MPV are not subject to VAT. Only when the MPV is redeemed can the amount of VAT incurred be calculated, and becomes payable. As long as the voucher is not redeemed, no VAT has to be paid, even though it has already been received. The price indicated on the voucher is generally the price including VAT. This results in a cash flow advantage.
What about expired vouchers that are not redeemed? VAT was already incurred on an expired SPV at the time of issue. As such, this VAT cannot be refunded when the voucher expires. Except of course in situations where the voucher is taken back and refunded. On the other hand, when an MPV expires, no VAT has been incurred and no longer will be. An MPV that expires does not therefore give rise to any payable VAT, even if the future VAT payable was in principle taken into account when the price was determined.
Possibilities for optimisation
Depending on your specific situation, the use of vouchers can be optimised. Optimisation is partly determined by the type of voucher used. We give some examples below.
As indicated above, an MPV that is not redeemed on time will result in higher turnover than an SPV that expires. When an SPV is issued, the VAT incurred must be paid. When an MPV is issued, no VAT is immediately incurred. It only needs to be paid when the voucher is redeemed. As such, if the voucher is not redeemed, the turnover consists of the value paid for the voucher including the VAT amount taken into account in determining the sales price of the voucher.
On the other hand, an SPV may in some cases reduce the costs of the person purchasing it. For example, a company that issues a voucher as an end-of-year gift to its employees (here we assume that this end-of-year gift meets the conditions for the right to a deduction, e.g. cost price lower than €50 excluding VAT). In this context, the purchase of MPVs does not result in any incurred VAT, which means that the business cannot deduct VAT on the purchase either. The costs for the company then consist of the full price paid for the MPVs. If, on the other hand, SPVs are purchased by the company, VAT is indeed incurred, and the company will in principle be able to deduct it. The costs in this respect will consist of the amount paid for SPVs minus the deductible VAT.
Although the Belgian legislator has meticulously transposed the European Directive, there are still a number of specific situations that are not clearly defined. We can expect to have a lot more discussions in the future, especially regarding the cross-border use of vouchers.
And what about discount coupons?
As mentioned above, discount coupons do not fall under the new rules. How do you process these discount coupons as a retailer? Suppose that your customer gives you a voucher. It is a discount coupon distributed free of charge by a manufacturer (e.g. €5 discount when you purchase a certain product or a coupon for a free product), which the manufacturer subsequently reimburses to the retailer. In this case, you need to take the value of the coupon (from which you obtain the VAT) into account upon delivery of the goods, when determining your VAT turnover. The refund of the coupon by its issuer does not result in any payable VAT for the retailer. If, as a retailer, you give out free vouchers yourself, you do not have to pay VAT on the vouchers that are redeemed. These represent a discount granted by you.