Flashback on ECJ Cases – C-317/94 – Elida Gibbs Ltd. – Money back and discount coupons – Taxable amount to be adjusted

On Oct 24, 1996, the ECJ issued the decision in case C-317/94 Elida Gibbs Ltd. dealing with the Taxable Amount in case Money Back or Discounts vouchers are used by the consumer to pay for products. The conclusion is that the taxable amount is the price paid paid by the consumer, so after deduction of the value of the voucher. Upon repayment of the voucher to the customer, the manufacturer can adjust the VAT element of the voucher.

Context: Tax provisions ° Harmonization of laws ° Turnover taxes ° Common system of value added tax ° Taxable amount ° Sales promotion scheme involving, after purchase by the final consumer, reimbursement from the manufacturer on presentation of a voucher issued by the manufacturer ° Taxable basis constituted by the sale price charged by the manufacturer less the amount reimbursed

Article in the EU VAT Directive

Article 11(A)(1)(a) and Article 11(C)(1) of the Sixth Directive (Article 73 and 90 of the EU VAT Directive 2006/112/EC).

Article 73
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.

Article 90
1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.
2. In the case of total or partial non-payment, Member States may derogate from paragraph 1.

Facts

The case concerns the interpretation of Article 11 of the Sixth Directive, Council Directive 77/388/EEC, which relates to turnover taxes and the common system of value added tax (VAT).
The question is whether the taxable amount for VAT purposes should be reduced by the amount indicated on a coupon issued by a manufacturer and refunded to the retailer or customer.

Questions

1. Money-off coupons

What, on the proper construction of Article 11(A)(1)(a) and 11(C)(1), is the ‘taxable amount’ of an original supplier in the situation of Elida Gibbs (as found in paragraph 4 of the Interim Decision), namely where:

(a) the original supplier is a ‘manufacturer’ who procures the issue of a money-off coupon which is redeemable at the ‘stated amount’ (as printed on the coupon) by or at the expense of the manufacturer in favour of the retailer,
(b) the coupon which is distributed to a potential customer in the course of a sales promotion campaign may be accepted by the retailer when the customer purchases a specified item of goods from the retailer,
(c) the manufacturer has sold the specified item of goods at the ‘original supplier’ s price’ either direct to the retailer or to a wholesaler, and
(d) the retailer accepts the coupon on sale of the item of goods to the customer, presents it to the manufacturer and is paid the stated amount?

Is the manufacturer’ s taxable amount the manufacturer’ s price or that price less the stated amount?

Is the answer to the above question any different if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer?

2. Cash-back coupons

(a) in the course of a promotion scheme the original supplier (‘ the manufacturer’ ) sells items of goods at the ‘manufacturer’ s price’ either direct to a retailer or to a wholesaler,
(b) a cash-back coupon for a ‘stated amount’ is printed on the wrapping of those items of goods entitling the customer, who proves purchase of one of those items of goods and satisfies other conditions printed on the coupon, to present the coupon to the manufacturer in return for payment of the stated amount, and
(c) a customer purchases such an item of goods from a retailer, presents the coupon to the manufacturer and is paid the stated amount?

Is the manufacturer’ s taxable amount the manufacturer’ s price or that price less the stated amount?

Is the answer to the above question any different if the original supply is made by the manufacturer to a wholesaler rather than to a retailer?

AG Opinion

Article 11(A)(1)(a) and (C)(1) of Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment should be interpreted as follows:

The taxable amount in respect of the supply of goods to a wholesaler or retailer by a supplier who procures the issue to potential consumers of money-off coupons printed with offers of stated reductions in the price of its specified products is not reduced by payments made by that supplier to retailers corresponding to the price reductions allowed by them to consumers presenting those coupons to purchase those products.
The taxable amount in respect of the supply of goods to a wholesaler or retailer by a supplier who arranges for the printing of cash-back coupons on the said goods containing offers of cash refunds in specific amounts is not reduced by payments made by that supplier to consumers corresponding to the amounts so printed on products purchased by them.

Decision

1. Article 11(A)(1)(a) and Article 11(C)(1) of the Sixth Directive, Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, are to be interpreted as meaning that where

(a) a manufacturer issues a money-off coupon, which is redeemable at the amount stated on the coupon by or at the expense of the manufacturer in favour of the retailer,

(b) the coupon, which is distributed to a potential customer in the course of a sales promotion campaign, may be accepted by the retailer in payment for a specified item of goods,

(d) the retailer takes the coupon from the customer on sale of the item, presents it to the manufacturer and is paid the stated amount, the taxable amount is equal to the selling price charged by the manufacturer, less the amount indicated on the voucher and refunded. The same applies if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer.

2. Article 11(A)(1)(a) and Article 11(C)(1) of the Sixth Directive are to be interpreted as meaning that where

(a) in the course of a promotion scheme a manufacturer sells items of goods at the ‘manufacturer’s price’ direct to a retailer,

(b) a cash-back coupon for an amount stated on the packaging of those items entitles the customer, if he proves purchase of one of those items and satisfies other conditions printed on the coupon, to present the coupon to the manufacturer in return for payment of the stated amount, and

(c) a customer purchases such an item from a retailer, presents the coupon to the manufacturer and is paid the stated amount, the taxable amount is equal to
the selling price charged by the manufacturer, less the amount indicated on the coupon and refunded. The same applies if the original supply is made by
the manufacturer to a wholesaler rather than directly to a retailer.

Comments

If a manufacturer issues discount coupons which may be reimbursed for the amount specified thereon by or on behalf of the manufacturer in favor of the retailer; the coupons issued to potential customers as part of an advertising campaign can be accepted by the retailer when the customer purchases a particular item from him; the manufacturer has sold that particular item at factory price to the retailer or to a wholesaler, and when the retailer sells that item to the customer, takes the receipt, returns it to the manufacturer and receives the amount indicated on it, the taxable amount shall be the same at the manufacturer’s retail price, minus the amount indicated and reimbursed on the receipt.

If a manufacturer sells goods at “factory price” directly to the retailer as part of a promotional campaign; a “money back” voucher for a specified amount has been printed on the packaging of those goods, which entitles the customer providing proof of purchase of that item and fulfilling the other conditions stated on the voucher for To exchange the declared amount from the manufacturer, and the customer buys the item concerned from the retailer, returns the voucher to the manufacturer and receives the declared amount, the taxable amount is equal to the manufacturer’s retail price, minus coupon declared and amount refunded. This is also the case when the manufacturer has first supplied the goods to a wholesaler instead of directly to a retailer.

Source