In this edition of our News Flash, we would like to present the case C-68/23 between the German company M-GbR and the German tax authority, regarding the qualification of sale of multi-purpose vouchers as decided by the European Court of Justice (ECJ). The court was asked to rule on how VAT should be applied to a chain of distributors who buy and sell prepaid vouchers in the context of cross-border transactions.

Sale of multi-purpose vs. single-purpose vouchers

In 2019, the company M-GbR sold prepaid vouchers called “X-Cards”, intended for customers residing in Germany, which were marked with a country code. These vouchers, issued by company Y, based in the United Kingdom, allowed customers to top up their user accounts in an online store managed by company Y and purchase digital content. When opening user accounts, customers were required to provide accurate information about their permanent residence. In practice, however, some customers entered incorrect information when creating their user accounts in order to get a better price that was meant for customers from other countries.

Following cases of incorrect information in customer accounts, M-GbR believed that the X-Cards were multi-purpose vouchers, as there was no way to reliably determine the permanent residence of the end customers. However, the German tax authority argued the opposite, considering these vouchers to be single-purpose vouchers since they could only be used by customers with permanent residence in Germany. The ECJ ruled that the circumvention of the terms of use by some customers is not decisive for the tax qualification of the vouchers.

European Court of Justice Ruling

The ECJ underscores the importance of distinguishing between single-purpose and multi-purpose vouchers in the context of VAT application. The qualification of a voucher as a single-purpose voucher depends on the criteria set out in the EU VAT directive, and it does not matter whether the voucher is transferred between taxable persons from different Member States. According to Article 30a, point 2 of the VAT directive, when issuing a single-purpose voucher, the place of supply of goods or services must be known at the time of issuance, as well as the VAT payable on those goods or services. This also applies when the voucher is transferred between taxable persons in different Member States.

On the other hand, if vouchers are qualified as multi-purpose under Article 30a, point 3 of the EU VAT directive, and are subject to one or more transfers within a distribution chain extending across the territories of several Member States, prior to being exchanged by the final consumer, the question arises as to whether the consideration received for each transfer of the voucher between taxable persons must be subject to VAT as consideration for a service other than the exchange of the voucher for goods or services. In this context, it should be noted that if the transfer of a multi-purpose voucher is carried out by a taxable person other than the taxable person who actually delivers the goods or provides the services to the final consumer, any provision of services, such as distribution or promotional services, which can be identified, will be subject to VAT. The ECJ thus ruled that the further sale of a “multi-purpose voucher” by a taxable person may be subject to VAT, provided that it is qualified as a supply of services in favor of the taxable person who, in return for the vouchers, carries out the actual delivery of goods or the actual provision of services to the final consumer.

If your company deals with single-purpose or multi-purpose vouchers and you believe that the VAT assessment may be incorrect, our tax experts will be happy to provide you with advice in this area.

Barbora Juhásová

Tax Manager | Accace Slovakia

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