City Card constitutes a multi-purpose voucher for VAT purposes | Deloitte Nederland

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City Card constitutes a multi-purpose voucher for VAT purposes

The CJEU ruled in the DSAB Destination Stockholm case on the application of new voucher rules of the VAT Directive with regard to city cards.

2 May 2022

On April 28, 2022, the Court of Justice of the European Union (“CJEU”) ruled in the DSAB Destination Stockholm case for the first time on the new definitions of “voucher” and “multi-purpose voucher” for VAT purposes as described in the new voucher rules of the VAT Directive applicable from 1 January 2019.

The CJEU further ruled that the a city card in this situation constitutes a multi-purpose voucher (“MPV”).

Background

In the DSAB Destination Stockholm case (C-637/20), the applicant issues and sells city cards to visitors to Stockholm (Sweden). The card gives cardholders the right to be admitted to around 60 attractions, such as sights and museums, for a limited period of time and up to a certain value. Cardholders also have unlimited access to transport services during the validity of the card, as well as the possibility of joining various sightseeing tours. The card can be used for services which are either subject to VAT, at various rates, or VAT exempt.

DSAB Destination Stockholm takes the view that the city card constitutes a voucher for VAT purposes, because suppliers are obliged to accept it as consideration. The terms and conditions for cardholders specify the services which can be paid for with the card and who the suppliers are. Furthermore, DSAB Destination Stockholm argues that the city card qualifies as a MPV, as the card can be used as a substitute for services with different VAT rates. Accordingly, it is not known at the time of issue at what rate VAT is payable on the services for which the card is issued.

The Swedish Tax Authorities, on the other hand, argue that the city card is not a voucher for VAT purposes, because:

  • A maximum value limit and limited validity are not conditions to qualify as a voucher for VAT purposes;
  • The city card does not show the cardholder how much credit remains on the card, which is a condition to qualify as a voucher for VAT purposes;
  • Some aspects of the city card are similar to a subscription, which means that the card cannot be treated as a voucher for VAT purposes; and
  • The city card cannot be classified as a voucher for VAT purposes because, due to its limited period of use, it is impossible for the average consumer to use all the services covered by the card, which is a condition to qualify as a voucher.

The CJEU ruled that the city card qualifies as a voucher, because it is an instrument that:

  • entitles the holder to
  • take advantage of various services in a given place
  • for a limited period and up to a certain value.

The fact that there is a limited period of validity of the instrument is not relevant for the classification of a voucher. Furthermore, the city card classifies as a MPV, since the VAT payable on those services is not known at the time of issuance of the instrument.

Practical impact

Due to the qualification as an MPV, VAT is applied at the time of the actual supply of the goods or service in question, so that the tax is not charged on sale of the city cards.

Unfortunately the CJEU did not touch upon what was arguably an interesting part of the earlier opinion of AG Ćapeta: what to do with the remaining value on the city card if the value of all services redeemed in practice is lower than the price paid for the voucher? One of the three options given by the AG was that so-called breakage should be considered the consideration for a service performed by the issuer of the city card. As this issue was not part of the question from the referring Swedish court, we are not surprised the CJEU does not cover this in its decision. Nonetheless, it would have been helpful if the CJEU had rejected this view of the AG clearly and without reservations.

Furthermore, the CJEU dismissed the qualification of the issue of the city card as a single supply of services in this case, as this would potentially limit the application of a VAT exemption or reduced VAT rate to the supplies to the cardholders paid for with the city card or would lead to double taxation, which is not in line with the purpose of the new voucher rules.

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