Key conclusions of the CJEU

The decision of the CJEU in DSAB concluded that 'City Card' vouchers offering tourists access to a range of attractions and travel services such as 'hop-on-hop off' bus tours and entry to museums constituted an MPV within the meaning of the Directive. 

The CJEU noted that, under the terms of the Directive, the only two criteria for an instrument to qualify as a voucher are that it (a) carries an obligation for vendors to accept it as consideration for goods or services where (b) the goods and services for which the instrument are accepted as consideration, or the identity of the potential suppliers, are indicated on the instrument itself or in supporting documentation. 

In light of the definition of 'voucher' under the Directive, the CJEU confirmed that an instrument need not exhibit any other criteria to be treated as a voucher under the Directive, such as: 

• A precise nominal or face value
• A particular duration
• The precise number, or description or nature, of the goods and services for which the instrument can be redeemed being clearly ascertainable
• The holder of the instrument being capable of taking advantage of all potential goods and services available
• The instrument showing the holder how much credit is still remaining

Overview of the Directive

Background

The Directive (Council Directive 2016/1065) came into force with effect from 1 January 2019 to ameliorate problems of non-taxation and double taxation associated with the application of the Principal VAT Directive to vouchers. The Principal VAT Directive does not contain any specific provisions with respect to the VAT treatment of vouchers, leading to inconsistent or non-existent rules across EU member states, resulting in uncertainty and inconsistent VAT treatment. The Directive was intended to bring about greater certainty and uniformity in the approach of tax authorities and to ensure that any tax on consumption is proportional to the actual price of the rendered goods or services. As observed by AG Ćapeta (in her opinion in DSAB), the Directive's aim had only been to clarify how existing VAT principles applied to vouchers and did not introduce a new regime distinct from the general VAT rules for goods and services. The main changes implemented under the Directive involved introducing new definitions of 'voucher' and to confirm the supply analysis for the issue and redemption of such instruments.

Supply analysis

VAT is charged on each distinct supply of goods or services. Before the Directive, a customer could be deemed to receive two separate supplies (though the approach of tax authorities was inconsistent): the first when the voucher itself was issued, and the second when the underlying goods or services were actually supplied in return for redemption of the voucher. The Directive simplified the VAT analysis such that there is no longer a separate supply of the voucher itself — the only supply is of the goods or services to which the voucher relates, and the question is at what point that supply should be regarded as taking place.

Definition of vouchers

The Directive differentiates between an SPV and an MPV. SPVs are defined as vouchers where (a) the place of supply and (b) the amount of VAT payable are known at the time of issue. In order to be able to calculate (b), the goods or services supplied do not need to be precisely identified, but the range of goods and services available would have to be within a single VAT rate, i.e., standard, reduced or zero-rated. 

MPVs are defined by exclusion, i.e., any voucher that is not an SPV is an MPV. An MPV would be a voucher that could be redeemed for many different goods or services and to which different VAT rates would apply, for example, a gift card for a major online retailer, whereas an SPV is typically redeemable for a narrower range of goods and services (whether or not precisely identified). The Directive also introduced a new rule for calculating the taxable amount on a supply under an MPV. The relevant amount is the consideration paid for the voucher, or in the absence of that information, the monetary value of the MPV itself (less applicable VAT).

Tax point

SPVs are taxed when issued and on each subsequent transfer, and there is no additional supply of goods upon redemption. Taking a simple example, where A issues a bus voucher to B that is then redeemed by B for a bus trip provided by A, there is a single supply of services to which VAT is charged to A at the time the voucher is issued.

MPVs are taxed when they are actually redeemed, and so no VAT is payable upon their issue or subsequent transfer. This is logical, as the VAT due has yet to be determined. To build on our prior example, where A issues an MPV (e.g., a voucher that can be redeemed for a bus journey, museum tour or a meal subject to a reduced rate of VAT) to B, which is then redeemed by B for A's bus trip, no VAT is due on the issue of the voucher, and there is a single supply of services on which VAT is charged to A at the time the bus service is rendered. If B redeems the voucher for a meal at C's restaurant, VAT is payable by C on the supply of the meal at the point of redemption.

Where an intermediary buys and resells an SPV, it is treated as buying and reselling the underlying supply of goods and services, and no separate service to the issuer is recognized. Any commission earned by an intermediary for the transfer of an MPV will be separately recognized and invoiced for VAT purposes.

The dispute in DSAB

The CJEU issued its decision in DSAB on 28 April 2022. The dispute concerned the VAT liability of tourist City Cards. The CJEU held that the card in dispute, which allowed tourists access to over 50 attractions throughout Stockholm, was a 'voucher' within the meaning of Article 30a of the Directive, and an MPV. This meant that VAT was not applicable when the taxpayer issued the City Card to customers.

The 'voucher'

The issuer (DSAB) offered a City Card product to tourists in Stockholm that gave the holder access to over 50 attractions (including transport) across the city for a limited time and up to a certain value. The customer did not have to pay anything further after purchasing the card, with each supplier receiving remuneration directly from the issuer. DSAB offered many tiers of City Cards with differing validity periods and value limits. For example, an adult 24-hour pass was EUR 65 and was capped at EUR 175 of redemption value. While transport was unlimited, the cards could only be redeemed once for each attraction. DSAB argued that their City Card was an MPV.

The tax authority's arguments

The Swedish Tax Authority's principal argument was that the City Card was not a voucher because it had a high value limit and a short validity period, which together meant that the average consumer could not make full use of the card.

The judgment

The CJEU held that the only criteria for an instrument to qualify as a voucher are that it carries an obligation for vendors to accept it as consideration for goods or services, and that such goods or services are indicated on the instrument itself (or its supporting documentation). The simple justification for this approach was that these are the only conditions listed in Article 30a of the Directive, and so other conditions, contrary to the tax authorities' arguments, are not relevant considerations.

The CJEU further determined that as the City Card was a voucher, it must be an MPV as it would be impossible to calculate the VAT amount due at the time the voucher is issued. This was because the attractions for which the card could be redeemed were subject to different VAT rates, and it was impossible to predict how a typical customer would use the card. It was therefore not possible to determine, at the time of issue of the card, the VAT due on the services for which it was used.

Comment

The CJEU opinion is short and simple and provides some useful instruction as to how the Directive is intended to operate and how its key provisions are to be interpreted. However, it is notable that the court did not engage with some of the more nuanced arguments advanced by tax authorities in the lower courts — or the wider policy debate around the tax treatment of vouchers conducted in AG Ćapeta's opinion.

Discounts

In Swedish domestic proceedings, the Swedish Tax Agency argued that the City Card resembled a discount voucher as it entitled customers to EUR 175 of value for only EUR 65, and noted that instruments that entitle the holder to only discounts (and not to receive goods and services) were not targeted by the Directive. Indeed, in its referral, the Supreme Administrative court referred to EU Commission comments on the Directive, stating that the right to a discount on all purchases within a certain time period should not constitute a voucher even if supplied for consideration.

We note that the Directive as implemented is clear that formal 'discount vouchers' are excluded from the new rules. However, it appears that vouchers such as the City Card scheme are not considered 'discount vouchers' as they grant the user an entitlement not only to a discount but also an entitlement to receive the goods or services themselves. As noted by the EU VAT Committee, it is in the nature of a voucher to grant access to attractions at reduced prices, and so this form of 'discount' should not prevent such instruments being seen as vouchers.

Subscriptions

In the CJEU proceedings, the Swedish Tax Authority argued that unlimited use of transport services under the City Card was best analyzed as a subscription and not a voucher. In response, AG Ćapeta distinguished the City Card from a subscription on the grounds that the City Card granted each customer only the possibility of acquiring a subscription — such that the 'taxable operation' only occurs if the card is so used whereas under a formal subscription, this 'taxable operation' must occur upon the transfer of the subscription fee. Moreover, just because the City Card (as a voucher) might be seen to be used as consideration for a separate subscription, it did not preclude the City Card itself from being classified as a voucher.

While the CJEU did not comment on or otherwise endorse AG Ćapeta's subscription analysis, it is nonetheless instructive for businesses with subscription services that may resemble a voucher. The key differentiator is that access to goods or services under a subscription is immediate whereas a voucher requires a necessary further step where the customer must redeem the voucher in exchange for the relevant good or service.

Conclusion

The decision of the CJEU in DSAB confirms that the Directive is intended to apply broadly, and should result in a clearer and more harmonized approach to the taxation of vouchers. Having said that, there remains some uncertainty as to how more nuanced and less traditional offerings should properly be treated, and it seems clear that there will be further litigation arising from tax authority challenges, particularly given that an MPV results in deferred taxation.