What is the correct VAT treatment of transactions with vouchers in the context of promotional activities?
2) Reason for / importance of the research
Promotional activities are at the intersection of VAT levy and deduction. Entrepreneurs carry out promotional activities to increase their often taxable turnover. There should therefore be no VAT on the costs of such (promotional) activities. This VAT should therefore be deductible. On the other hand, promotional activities often lead to private consumption among the target group. Private consumption should be taxed. This research seeks to determine the correct VAT treatment of such activities. In addition, vouchers are often used in the context of promotional activities. Since January 1, 2019, there have been specific rules for the VAT treatment of transactions with vouchers. However, these new rules do not seem to lead to an optimal tax result. This research is therefore partly aimed at the question of how such transactions should be treated from a VAT perspective. An EU perspective was chosen because the VAT rules are prescribed by the EU, with individual member states only being autonomous on specific points.
3) Research method
The research was carried out as a qualitative literature review, in which existing sources (legislation, regulations and case law) are tested against the purpose of the European VAT (taxing expenditure on local consumption) and the ‘economic reality’ of the relevant transactions .
4) Main conclusion(s)
The main conclusion is that the new VAT rules for voucher transactions do not solve all existing problems and also create new problems and raise questions. I believe that the new rules were in fact not necessary and that the existing problems could have been solved more simply and differently. In addition, I have concluded that the current VAT treatment of certain promotional activities, such as discount promotions and barter transactions, could be different and improved.
5) Main recommendation(s)
My main recommendations are in fact to withdraw the rules for the VAT treatment of vouchers as they came into force on January 1, 2019, as existing problems can be solved more efficiently with some clarifications of the interpretation and application of existing rules can be resolved. I also provide alternative VAT treatments for specific discount promotions and for barter transactions.
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