Insights
INTERNATIONAL TAX
Loyalty programme is not a voucher
Many suppliers offer loyalty programmes: customers collect points and can later redeem them for goods or prizes. The Court of Justice of the European Union (CJEU) had to decide whether such loyalty points are to be treated for VAT purposes as vouchers.
Specifically, the case concerned a Swedish retailer that sells hair‑care and beauty products and wishes to introduce a customer loyalty programme. Customers can join free of charge and receive loyalty points for each purchase, which can later be redeemed for selected, regularly changing products. The products usually have a value of at most EUR 50 and are subject to different VAT rates. Each product offered in the “points shop” is assigned a points value corresponding to roughly 2% to 10% of the original purchases. The points are neither convertible into cash nor purchasable for a fee, they are personal and non‑transferable. Redemption takes place exclusively against loyalty points within two years. The CJEU denied that a voucher was present.
Requirements for a voucher
According to the VAT Directive, a voucher exists only if
Because one of the two conditions for the qualification or classification of vouchers was not met, the customer loyalty programme could not be classified as either a single‑purpose voucher or a multi‑purpose voucher.
Tip
The establishment of a loyalty‑points programme should always be carefully planned and examined from a tax perspective in advance, as it can give rise to VAT classification issues. An early tax analysis can help avoid risks and design the arrangement in a tax‑optimal way.
Requirements for a voucher
According to the VAT Directive, a voucher exists only if
- the obligation exists to accept it as consideration or part of consideration for a supply of goods or the provision of services, and
- the goods to be supplied or services to be provided, or the identity of the potential supplier, are indicated either on the instrument itself or in the accompanying documentation.
Because one of the two conditions for the qualification or classification of vouchers was not met, the customer loyalty programme could not be classified as either a single‑purpose voucher or a multi‑purpose voucher.
Tip
The establishment of a loyalty‑points programme should always be carefully planned and examined from a tax perspective in advance, as it can give rise to VAT classification issues. An early tax analysis can help avoid risks and design the arrangement in a tax‑optimal way.