New VAT legislation regarding vouchers as of January 1, 2019

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New VAT legislation regarding vouchers as of January 1, 2019

The impact for the Travel and Hospitality sector

As of January 1, new rules on vouchers should be implemented into the local VAT legislation of EU Member States. As these rules will impact the VAT treatment of vouchers in case vouchers are used as remuneration, it is key to act now. The changes in the VAT legislation impact companies in various sectors, including travel and hospitality.

The new VAT legislation in short

The new VAT rules on vouchers relate to the definition of a voucher, the types of vouchers, the moment of taxation and the taxable amount of the vouchers. These topics are also mentioned in our infographic which is attached to this article.

In order to establish whether the vouchers in your company would fall under the new legislation, it should be determined whether a voucher qualifies as a voucher within the meaning of VAT. Discount vouchers should for example not be regarded as a voucher.

As a next step it should be assessed whether the vouchers qualify as single-purpose vouchers (‘SPV’) or multi-purpose vouchers (‘MPV’). The moment of taxation is the key difference between these two vouchers. In addition, no VAT will be charged at all in case a MPV will not be redeemed. This is an incentive for businesses to qualify a voucher as a MPV.

Vouchers - action required

How would this work in practice?

If for example a hotel chain sells a voucher for a stay in one of their hotels in the Netherlands, the voucher would qualify as a SPV as it is clear from the beginning that the place of taxation is the Netherlands and the hotel stay is subject to the reduced VAT rate. VAT is due upon issuance of the voucher and any subsequent sale of the voucher.

If the voucher would be for a stay in one of their hotels in the Benelux, the voucher would qualify as a MPV as the country of taxation is unknown upfront. VAT is then due upon redemption of the voucher. The same applies in case the voucher would be for a stay or a wine tasting dinner in one of the hotels in the Netherlands. In that case the voucher also qualifies as a MPV as even though the country of taxation is known upfront (i.e. the Netherlands), the applicable VAT rate is not (the voucher could also be redeemed for an alcoholic drink during dinner).

Points to consider

Taking the above into account, we advise to re-assess the vouchers in your business. As a marketing manager you could consider the possibilities for which purposes vouchers could be redeemed (i.e. only for a hotel stay and/or only in the Netherlands?). As a tax manager it is recommended to identify the different types of vouchers in your business and implement the new VAT rules into the ERP-system. Risks (late payment of VAT in case of a SPV) and opportunities (prevent unnecessary payment of VAT in case of a MPV) exist with the new VAT legislation.

For the sake of completeness we note that the above does not cover the VAT rules regarding discount vouchers or loyalty schemes. As discount vouchers and loyalty schemes are also common in the travel and hospitality sector, we recommend to also analyze these consequences in more detail as some of these rules might change as well. In case of any questions or if our assistance is preferred, please do not hesitate to reach out.

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