At the beginning of last year, we have published an article informing you that after four years the Council of the European Union has adopted Directive 2016/1065 modifying rules as regards the treatment of vouchers. Attempts at unifying the legislation for vouchers appeared in 2012 already when the European Commission tabled a proposed Directive of the Council 2012/0102. However, this proposal was very theoretical and many of the issues were not agreed on by the member states. This resulted in the proposal being practically useless for practice. Following long negotiations and many changes, agreement was reached, and the Council Directive 2016/1065 as regards the treatment of vouchers was adopted. The Directive aims to unify rules in all EU countries in order to lower the administrative burden and avoid double taxation, or, tax avoidance on transactions realized by vouchers.

National legislations of all member states should thus include a definition of a voucher for VAT purposes, unified rules as regards the date of the chargeable event, tax base assessment, and the right to deduct. The unified rules will be different for different types of vouchers, which can be either single-purpose or multi-purpose. The new rules should target only vouchers, which can be used for redemption against goods or services. They do not target the so called discount coupons, which entitle the customer to a discount on goods or services.

Czech legislation shall include the definition of a voucher in Section 15 of Act on VAT. The fundamental characteristics of a voucher, distinguishing vouchers from other means of payment, is the obligation to accept the voucher as redemption or partial redemption against goods or services, and, at the same time, information about the chargeable event or the supplier must be evident from the voucher.

There are two types of vouchers based on their utilization: single-purpose and multi-purpose.

Single-purpose voucher for the purposes of VAT means a voucher which entitles the holder to acquisition of specified goods or services, if it is possible - from the very beginning - to determine definitively the VAT rate and place of event for the chargeable event. Examples of single-purpose vouchers are:

• Voucher for accommodation in an ABC Hotel in České Budějovice.
• Voucher for accommodation in a hotel from the Alfa chain in the Czech Republic.
• Voucher for lunch in an XY Restaurant in Prague (excluding beverages).

Single-purpose vouchers do not include e.g. a discount coupon on goods in a store.

Single-purpose vouchers may be issued either by the entity which shall subsequently provide the goods or services to the customer (issuer = supplier), or an entity other than this (issuer ≠ supplier). The distribution of vouchers among the customers can be direct between the issuer and the customer, or via other parties acting as distributors.

It is always the case with single-purpose vouchers that every such transaction (including the first handover to the acquirer) is subject to VAT, in the same way delivery of goods or providing of services would be, regardless of who was the issuer of the voucher. It is important to distinguish the issuer only upon the final redemption of the voucher by the customer because this is the moment in which the VAT rules could vary depending on the issuer.

With single-purpose vouchers issued by the same entity as the one delivering goods or providing services, the final redemption of the voucher by the customer is not considered to be the chargeable event with regard to the fact that the VAT has been deducted upon the handover of the voucher to its acquirer. From the point of view of VAT in such cases the final redemption of the voucher by the customer does not need to be solved anyhow anymore.

However, the situation is different in cases where the voucher was issued by some entity other than the supplier. In those cases, both handover of the voucher from the issuer to the customer and the final redemption of the voucher are considered chargeable event. It is necessary to add that for the purposes of maintaining fiscal neutrality of the VAT, so called legal fiction is applied upon the final redemption of the voucher and the transaction is viewed as if the goods or services were provided by the supplier to the issuer.

Multi-purpose voucher for the purposes of VAT means vouchers for chargeable events whose specifics are not known in advance. With multi-purpose vouchers the tax becomes chargeable upon redemption of the voucher. In other words, individual transactions of multi-purpose vouchers do not give rise to a chargeable VAT event.

Examples of such vouchers are:

• Voucher for a rechargeable coupon (prepaid SIM card).
• Voucher for lunch in a restaurant including wine offer.

All vouchers issued before January 1, 2019 will be subject to currently existing regulations, according to the amendment.

This article is not an attempt to list all the changes and their effects concerning vouchers. Because in practice, many situations may arise which will have to be dealt with regarding the future; those are e.g.: situation in which there are more entities involved in delivering the voucher to the final customer (in various roles - issuer,  intermediary, distributor), reciprocal payments (advance payments, balance payments), obligation to issue invoices in various situations, entitlement to tax deduction, and the problems of possible return or non-redemption of the voucher by the final customer.

With regard to the above mentioned, we would suggest entities who make use of such support of sales to find out whether these changes could affect them or not.