The amendment of Act 235/2004 Coll. on Value Added Tax (further only “VAT Act”), in effect since 1 April 2019, which we have written about in several articles on our website, brought among other things a change to the area of different types of vouchers. Before the amendment came into effect we informed you in our article about the coming changes regarding vouchers. Because it is an entirely new and specific provision, we may expect a number of questions that will arise when it is applied in practice. Some of these have been dealt with by the Coordination Committee of the Chamber of Tax Advisers, and the General Financial Directorate published its own Information on this topic.

The Information sums up the new rules contained in the VAT Act, it explains the theory and also lists particular cases dealing with the elemental situations which may arise. It explains the differences between single-purpose and multi-purpose vouchers, when does the chargeable event occur and who is the receiver, what the taxpayer shall include in the tax base, who is eligible for a tax deduction and under what conditions, or the procedural obligations of the taxpayer. What might be considered positive is the attempt to shed light on the obligations of and relations between the involved parties, namely the issuer of the voucher, the acquirer or as the case may be other distributors, then customers, and suppliers of own goods or services which the voucher is for.

We would like to add that the new provision does not apply to discount vouchers and similar marketing tools.

In the Information there is a section dealing with specific situations which are very likely to occur in practice. For example the question of how should one proceed during warranty claims to goods or services paid for by a voucher, what are the consequences of an unused voucher, or a case of a voucher given free of charge. Because the individual voucher regulations are applicable not only to domestic chargeable events, the Information also concerns itself with cases of cross-border payments, both within the EU and outside of it.

In relation to the Information it should be mentioned that another largely discussed topic has reached its verdict, namely the topic of meal vouchers or “stravenky”. Based on a private contribution of the Coordination Committee which is accounted for in the Information, the General Financial Directorate concluded that meal vouchers shall be considered vouchers under the VAT Act, i.e. they are subject to all the provisions on vouchers. Whether they belong to the single-purpose or multi-purpose category is dependent on the individual type of each such voucher, and this has also been a topic for the already concluded contribution of the Coordination Committee.

After having read the Information we have observed that the area of vouchers is so broad in practice that it most likely cannot be fully covered by any one material. Besides, despite its efforts to provide explanations about the related issues we believe that the Information and its contents are not easy to read and understand.  In our opinion, some of the formulations in the Information are not specific enough, however, even in practice situations can arise during which it will be very difficult to asses the VAT regime itself despite the clearly set conditions. According to our experience, one may observe cases in practice with a number of different types of marketing support, for example selected goods or services may be party paid for by vouchers and the customer can also at the same time use discount vouchers, there may also be several contracting parties involved in one promotional event which could mean various transfers. Another question arises in the area of warranty claims or credit notes, and further also with events with the aforementioned cross-border element. For these areas the Information cannot provide a full description of solutions and gives only a basic commentary.

Another area, which is a whole chapter of its own, is the practical employment and setting up of IT systems. Based on our experience, it is precisely the IT system that takes a long time to react in a number of cases (and in some cases does not react at all), which leads to questions about possibilities and the correct steps to be taken in order to speed that process up and also about the final effects on the tax base and tax rate.

Thus it is important to note that practice is always a couple steps ahead of the theory itself. We may therefore expect that it is very likely that situations will arise for which the Information does not provide solutions.

Should you be interested in a consultation on this topic, please do not hesitate to contact us.

Milan Kolář