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Chapter 1 – Taxable amount – principal provisions

43. Vouchers, etc

Summary

This section deals with the VAT rules for gift tokens, gift vouchers, coupons, and similar products. In general, sales of these products (other than sales to intermediaries) are not liable to tax, except where and to the extent that the amount charged exceeds the face value. Goods and services that are supplied in exchange for the vouchers are liable at the rates appropriate to the supplies.

Details

The “redeemable value” of a coupon, stamp, telephone card, token or voucher (referred to in these notes as a “voucher, etc.”) is defined in the first instance in terms of the face value. If there is no face value, it is defined in terms of the monetary value of the goods/services that it can be used to buy.

(1)

The general rule, provided for in subsection (2), is that the sale of vouchers, etc. is not chargeable to VAT at the time of the sale of the vouchers, except to the extent that the consideration exceeds the redeemable value. The charge to VAT arises later, at the time the vouchers are being cashed in for the goods and services.

(2)

Notwithstanding the general rule above, subsection (3) provides that, where a voucher, etc. is sold to a person who is established in the State, in the course of business (for example, from a company to an intermediary (such as a shop) for onward supply to private individuals), the supplier is liable to VAT at the time of the sale and not later on when the voucher, etc. is redeemed.

VAT is also chargeable on the re-sale of the vouchers by the intermediary to the private customer. As VAT is chargeable on the sale of such vouchers, VAT will not arise when the vouchers are being redeemed for goods

A voucher with a redeemable value, which is sold to a business outside the State for onward supply, is not taxable on the sale but rather the tax arises at the point of redemption of the voucher, resulting in tax being accounted for when redemption of the voucher takes place.

(3)

Subsection (4) enables the value of certain transactions to be determined

 Supplies of trading stamps, tokens and the like which are not covered by the general rule and are supplied as things in action (for example – cash). In this case, the regulations may determine the amount to be nil. (See Regulation 11 of the VAT Regulations 2010.)

(4)(a)

 Supplies of goods or services given in exchange or part exchange for tokens/vouchers etc. Under Regulation 11 of the VAT Regulations 2010 the amount on which tax is chargeable for those goods and services is the consideration received for the face-value vouchers given in exchange for the goods and services in question. This paragraph is subject to subsection (3) or (5), which ensures that this valuation rule does not apply to vouchers sold through an intermediary or in the case of discounted vouchers.

(4)(b)

Where goods are exchanged for vouchers that were sold at a discount (and

where a satisfactory audit trail can be established) the amount on which

VAT is chargeable is the sum actually received on the sale of the vouchers regardless of their face value.

(5)(a)

Paragraph (b) gives the reference to the appropriate valuation rule in the

VAT Directive for the purposes of implementing subsection (5)(a).

(5)(b)

Example of tax treatment of discounted vouchers:

o X sells €500,000 worth of €10 vouchers to Y. Because Y purchases so many vouchers in bulk, it actually pays €8 (tax-inclusive) per voucher on the basis of a bulk discount. X issues a VAT invoice to Y accordingly. X accounts to Revenue for the VAT on this transaction. o Y sells the vouchers at face value to private consumers for €10 each.

The public are unaware of what price Y paid for the vouchers.

o Y accounts for VAT at the standard rate on the amount received, i.e. the face value of the voucher (€10). Y can recover the VAT included in its purchase price of the voucher.

o The individual who purchases the €10 voucher can present it in exchange for goods provided by X. As the VAT is already accounted for on the voucher, there is no further VAT due on the supply of these goods in exchange for the voucher.

PART 5 – TAXABLE AMOUNT

By way of background, the provision in subsection (5) gives effect to the October 1996 European Court of Justice decision in the Argos case (ECJ Case C-288/94). In this case, Argos was engaged in listing its goods in a catalogue and selling them from its showrooms. The goods could be paid for using vouchers issued and sold by Argos. The company sold the vouchers at face value. However, in the case of large volume sales, the vouchers were often sold at a discount. Typically, discounted vouchers were sold to businesses that bought them in bulk to give them to staff under incentive schemes. The question before the ECJ asked if the face value of the vouchers, or the discounted price actually paid, constituted the taxable amount for VAT. The ECJ held that the taxable amount for VAT was the sum actually received by Argos and not the face value of the vouchers.