Commission proposes new VAT rules for vouchers
Brussels, 10 May 2012 – Today, the European Commission proposed to update EU VAT rules to ensure the uniform tax treatment of all types of vouchers across all Member States. Vouchers represent a market of more than € 52 billion per year in the European Union. Prepaid telecommunications account for almost 70% of the voucher market, followed by gift vouchers and discount vouchers. However, differences in national VAT rules on vouchers lead to serious market inefficiencies. Instead of being able to really benefit from the Single Market, companies face problems of double taxation and difficulties in expanding their business across borders. The new rules seek to redress this situation.
Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said: "Vouchers are a booming business in Europe, with millions bought and sold every week. There is no justification for this ever-expanding market to be held back because of uncertainty and complications in the tax rules. With the new VAT rules proposed today, we can move to a genuine single market for vouchers, to the benefit of businesses, citizens and tax administrations."
Under the proposed new rules, the different categories of vouchers would be clearly defined, along with their VAT treatment. This would enable uniform treatment of transactions involving vouchers across Europe. The proposal includes provisions on defining vouchers for VAT purposes and identifying when VAT is due on vouchers (i.e. at point of sale or redemption). It also includes rules for vouchers passing through distribution chains and general means of payment. The new rules will enter into force on 1 January 2015.
Currently there are no EU VAT rules on how transactions involving vouchers should be dealt with. In the absence of common rules, Member States have developed their own practices. These are not coordinated and frequently cause problems for businesses and VAT collection. When a voucher is issued in one Member State and used in another, it is not always clear at what point the transactions linked to the voucher should be taxed. This is, for example, the case for international hotels promoting accommodation through vouchers in several EU Member States.
The objective of today's proposal is to clarify and harmonise the EU rules on the VAT treatment of vouchers. This will have a positive effect on businesses by eliminating situations of double taxation and uncertainty about tax compliance obligations. It will also help to close loopholes which facilitate tax avoidance by certain companies exploiting the mismatches between Member States. The new rules also fit well in the broader strategy of the Digital Agenda Europe, especially its objective to create a digital single market.
Firstly, the Commission proposes to harmonise the definition of vouchers for VAT purposes and the point of taxation for voucher transactions, to prevent mismatches which result in double taxation or double non-taxation. The time of taxation will be determined by the nature of the voucher, thereby clarifying if the tax should be charged when a voucher is sold or when it is redeemed for goods and services.
Secondly, the new rules draw a clear line between vouchers and other means of payment. The growing number of mobile devices makes it necessary to distinguish between prepaid telecom credits (which are vouchers) and mobile payment services (which are taxed differently). Changes in payment technology, notably the increasing use of mobile payments, require that any room for confusion is removed.
Thirdly, the Directive sets up common rules for the distribution of vouchers in a chain of intermediaries, especially where this extends across two or more Member States. A phone card for example can change hands several times in a distribution chain before it reaches the consumer and the businesses concerned need certainty about their tax obligations.
A number of other technical measures are included to deal with the right of deduction, redemption and reimbursement procedures, the person liable for payment of the tax and other obligations for businesses.
The Commission proposal is accompanied by an Impact Assessment. It concludes that the only effective way to deal with the identified shortcomings is to include the new provisions for vouchers in the VAT Directive. The EU VAT directive and impact assessment can be found at: