VAT on vouchers and interpretation of applying VAT to food vouchers after the amendment of the VAT Act

Starting on 1 April, the VAT Act governs the application of VAT to vouchers based on the implementation of the respective European directive. Generally, a voucher means an instrument with an obligation to accept it as payment or partial payment for supplied goods or provided services.

In practice, vouchers can be issued directly by the supplier of the respective goods or services which is the subject of the vouchers or by other persons who issue the voucher under their name (the issuer) and sell it later to other persons. After the voucher is claimed, the issuer receives the voucher back from the supplier and pays the value of the voucher to the supplier. The act stipulates different VAT regimes for single-purpose vouchers and multi-purpose vouchers.

Single-purpose vouchers

A single-purpose voucher is a voucher that has a definite VAT rate and a place of supply related to the specific supply at the moment of its issuance. Sale of such a voucher by the issuer or other person is considered a realised supply related to the specific supply and is subject to VAT. Upon the actual supply or provision of the service claimed by the voucher, the application of VAT depends on the issuer of the voucher:

• If the issuer is the supplier of the given supply, then the final delivery of goods or provision of services to the holder of the voucher is not already subject to VAT;

• If the issuer is a person other than the supplier, then the final delivery of goods or provision of services to the holder of the voucher is considered a supply performed by the supplier for the issuer of the voucher in the amount of the payment made via the voucher.

Multi-purpose vouchers

Other vouchers that do not meet the definition of a single-purpose voucher are considered multi-purpose vouchers (e.g. a voucher entitling the holder to purchase goods in a certain amount and the purchased goods can be subject to various VAT rates).

The issuance or the following sale of such a voucher is not considered supply or provision of services and thus is not connected with a VAT payment from the given supply. The VAT is applied upon the real supply of goods or provision of services claimed via the voucher.

Interpretation of applying VAT to food vouchers

According to the interpretation by the General Financial Directorate, the very popular food vouchers should be considered vouchers (as described above) and thus the above-mentioned procedure should apply depending on whether the food vouchers meet the definition of single-purpose or multi-purpose vouchers. In reality, the VAT regime for single-purpose food vouchers will change, which affects all participating parties, i.e. the issuer of the vouchers, the employer, and the final supplier of the catering service or supplier of the goods.

Sale of single-purpose food vouchers by their issuer to the employer is subject to VAT, and a 15 per cent VAT rate is applied to the commission charged to the employer as it is applied to a catering service or the supply of groceries which the holder of the food voucher is entitled to. If the employer provides food vouchers to employees for consideration, it is entitled to claim VAT paid during the purchase of the food voucher and the VAT from the commission, and at the same time, the employer pays output VAT for transferring the food vouchers to the employees. The GFD confirms that the employer can claim VAT also if the food vouchers are sold to employees with a considerable discount.

When an employee uses the food voucher at a specific supplier of a catering service or goods, then the supply is performed (i.e. sale of a catering service or goods) and VAT is applied by the supplier for the issuer of the food vouchers. The commission charged by the issuer of the food voucher to the supplier of the catering service or goods is subject to 21 per cent VAT.

In the case of multi-purpose food vouchers, sale to the employer or subsequent sale to the employee is not subject to VAT, and the respective commission charged to the employer is subject to the basic VAT rate of 21 per cent. VAT is paid by the supplier of the performed supply at the moment the supply is provided to the employee when the multi-purpose food voucher is used, and the tax base will be the nominal value of the food voucher.

The GFD in its statement confirms that the issuer of food vouchers can claim VAT from all direct and indirect costs related to issuance, distribution, and return of food vouchers with respect to standard conditions for claiming the deduction.

Practical impact

Employees who provide food vouchers or other similar benefits (for example vouchers on the purchase of health goods or using sport facilities) must now consider whether the food vouchers or other vouchers provided by them are single-purpose or multi-purpose vouchers with respect to VAT, and based on that, decide about the correct application of VAT. Conditions under which the benefits are provided to employees can influence the possibility of claiming the VAT paid by the employer when the vouchers are purchased from the issuer. The fact that the purchase of single-purpose food vouchers is now subject to VAT has an impact on the amount of tax-deductible cost applied by the employer under the Income Tax Act.