Qualification of voucher sales for VAT purposes in case of potential fraud

When distinguishing between single-purpose vouchers (so-called SPVs) and multi-purpose vouchers (so-called MPVs), it is necessary to examine whether, at the time of issue, the place of supply of the transaction to the final consumers to which the voucher relates and the amount of VAT due thereon are already known. The fact that final consumers may breach the conditions for the use of vouchers, e.g. by using them in a different country to that provided for in the regulations, does not affect their qualification – this is the essence of the judgment of the Court of Justice of the European Union in case C-68/23 Finanzamt O.

Facts

The case concerned a company selling, via an online shop, prepaid cards or codes that enabled users to load their accounts to purchase digital content in an online shop. The cards allowed purchasers to load an account allowing them to use the online shop with a certain value. The company issued the aforementioned cards and placed them on the European Union’s market with different country codes (e.g. cards marked with the letters ‘DE’ were intended exclusively for customers with a permanent residence in Germany and a German user account). When opening a user account and accepting the terms and conditions for the use of the cards, customers provided information regarding their permanent residence, but the Company did not verify the data provided by customers in order to determine with certainty the permanent residence of the end recipient. Consequently, the Company treated the cards sold as multi-purpose vouchers (MPVs) as, in the Company’s view, the place of supply of services was not known at the time of issuance of the voucher – which was challenged by the German tax authorities.

CJEU position

The Court held that, given the conditions for the use of the cards and the inclusion on the cards of an indication of the Member State in which the cards are to be used, it must be concluded that the place of supply of services was known at the time the cards were issued. Consequently, the condition that the place of supply of goods or services should be known at the time of issue of the voucher is fulfilled. In the Court’s view, the fact that, as a result of a breach of the conditions of use, the cards may be used by users residing outside Germany is irrelevant in this regard, since, to quote from the judgment: ‘The appropriate classification of a transaction for VAT purposes cannot obviously depend on any abusive practices.’ Furthermore, the application of a uniform VAT rate for digital products – which was also necessary for cards to be considered SPVs – was not in doubt in the case.

The Court’s ruling thus establishes that for the qualification of vouchers for VAT purposes, it is the scope of the benefits exchanged for the voucher and the circumstances of the transaction arising from the issuance of the voucher that shall be relevant, including among other the terms of use of the product and the vendor’s regulations. In contrast, the various potential possibilities for its actual use by the end user, if resulting from the abuse, do not change the qualification of the voucher. The judgment is important for taxpayers using vouchers, including those intermediating in the sale of vouchers, as by providing for a single point in time for assessing the nature of a voucher and its VAT treatment, it does not impose additional obligations on them to verify the end-users and maintains the certainty of the tax settlement in this respect.