Provision of gift vouchers in the light of the VAT Act

Service-Tax

Selling gift cards is a common marketing practice to attract more customers. In this way, entrepreneurs want to encourage customers to purchase goods and use the company's services. Consequently, there are doubts as to whether the transfer of gift certificates is subject to VAT.

The gift card is not a commodity

According to the general principle, VAT is subject to the transfer of goods against payment. Therefore, in order to determine whether the described activity of the entrepreneur has tax consequences, it must first be determined whether the gift card is recognized by the act as a commodity. According to the definition contained in art. 2 point 6 of the VAT Act, goods are understood as things and their parts, as well as all forms of energy. On the other hand, in common understanding, a gift card is understood as a proof that entitles you to receive certain goods within a specified period. The purchase of a gift card entitles the customer to receive certain goods in the future. At the time of its receipt, the customer does not purchase any goods. As a consequence, the sale of a gift card to a customer is only a promise on the part of the entrepreneur to deliver a specific product in the future. It is only when the gift card is presented that the customer can receive specific goods from the taxpayer. In light of the above, it is difficult to consider a discount card as a product, and since we are not dealing with it, there is no supply of goods subject to VAT.

At the time of purchasing the card, the customer does not obtain any financial benefits, it is only obtained when the card is redeemed by exchange for goods. The mere handing over of gift cards to customers does not involve any provision for them. Thus, the card only gives the opportunity to receive goods and services, which requires the customer to use it when exchanging it for a specific good or service. This means that the very act of selling a gift card is not a delivery of goods and is not taxable.

The provision of gift vouchers is not a service provision

In addition to the activity consisting in the supply of goods, the provision of services is also subject to VAT. In the light of the statutory definition, the provision of services is understood as any service provided to a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods. It should be noted, however, that at the time of the transfer of the gift vouchers, there is no provision of services, only the physical transmission of a document containing some entitlement. Neither can the issue of discount cards be equated with the provision of services, as the cards themselves do not satisfy any needs.

Tax authorities agree on gift certificates

In their tax interpretations, the tax authorities confirm the above position, recognizing that the entrepreneur is not obliged to tax the act of handing over gift cards to customers. Only the implementation of the card, i.e. the physical delivery of the purchased goods to the customer, will be an activity subject to VAT.

For example, it is possible to indicate the interpretation of the Director of the Tax Chamber in Katowice of September 22, 2015, No. IBPP2 / 4512-602 / 15 / IK, in which we read, among others:(...) the voucher, named in the discussed case by the Applicant "Gift Card", does not fall within the definition of goods within the meaning of (...) the provision of the VAT Act, but is only a document authorizing the receipt of goods. It replaces the money for which goods are customarily purchased, while the issue of this voucher takes place in return for the payment of funds by the client to the Applicant. Consequently, the sales activities of the above-mentioned Customers' cards cannot be equated with a supply of goods subject to value added tax. Therefore, the act of transferring the Gift Card for consideration is not subject to tax on goods and services, because it is not included in the catalog of activities subject to this tax, listed in art. 5 sec. 1 of the VAT Act.

The gift card fee is not a down payment

Pursuant to Art. 19a paragraph. 8 of the VAT Act, if all or part of the payment has been received before the delivery of the goods or the performance of the service, the tax obligation arises upon its receipt in relation to the amount received. It is worth noting, however, that the need to tax the advance payment will arise only when there is a direct relationship between the receipt of a certain amount and the delivery of goods. This means that the received advance payment must relate to the purchase of a specific product (see, for example, the judgment of the Supreme Administrative Court of 25 August 2010, I FSK 1100/09).

So, when charging a customer for a gift card, should it be treated as an advance payment? In response to this question, it should be stated that the fee charged is not a form of prepayment or advance payment, because customers, when purchasing the card in question, pay the appropriate amount for the goods, which is not predetermined. Thus, the payment made is not subject to tax on goods and services at the time of issuing the gift voucher. The payment that takes place before the delivery of the goods does not fully meet the definition of an advance payment. The future delivery is not yet specified in detail at the time of payment - the subject of sale, quantity and price are unknown. The tax obligation arises only when the goods are delivered, i.e. at the time of the sale of the goods.

Example 1.

On November 30, the client purchased a gift card worth PLN 100 in a clothing store. On December 22, the gift card was exchanged for trousers worth PLN 100. The tax obligation arose when a specific product was released. The sale will be included in the December tax return.

Record keeping at the cash register

The VAT Act obliges entrepreneurs to record sales made for the benefit of people who do not conduct business activity with the use of a cash register. However, bearing in mind that the sale of vouchers is not an activity subject to VAT, the entrepreneur does not register it at the cash register. This action takes place only when the goods are released or the service is provided in return for the gift card.

Example 1.

On September 5, the customer purchased a gift card worth PLN 200 in a sports store. On September 8, the card was exchanged for a tennis racket. The sale will be recorded and the receipt will be issued on the day when the tax obligation arises, i.e. on September 8.

EU directive on gift cards

Finally, it is worth noting that the Council of the EU also spoke about the taxation of gift cards. Directive 2016/1065, which entered into force on 2 July 2016, indicated that: The actual transfer of goods or the actual provision of services in exchange for a multi-purpose voucher accepted by the supplier or service provider as remuneration or part of the remuneration is subject to VAT in accordance with Art. 2, while each preceding transfer of this multi-purpose voucher is not subject to VAT.The directive confirms the position taken so far, according to which the sale of gift cards is not subject to VAT. It should also be remembered that national regulations should be adapted to EU regulations, therefore, in the future, we should expect the taxation of gift cards to be regulated in the VAT Act.