Either as part of the year-end closing or due to the approaching Christmas period, many companies will likely deal with vouchers either internally towards employees or externally as a marketing tool towards consumers and business partners. For this reason, we think it is important to analyze the impacts of the latest Swiss Court decision. This blog aims at briefly outlining the impact of the changed practice.
According to the previous Swiss VAT practice, a voucher qualified as means of payment for a service or certain goods, thus the sale of the voucher was not deemed to be a transaction in the scope of the Swiss VAT law. As a consequence, the tax-relevant date (giving rise to tax liability) was the date the voucher was redeemed. At this point the supplier had to charge VAT at the applicable tax rate according to the general principles of the VAT law. In other words, the sale of vouchers was not to be categorized by the issuer (or seller) as this sale was out of scope of the Swiss VAT law and the tax-relevant date was in the future at the time of the voucher’s redemption.
Voucher or Payment in Advance?
The recent decision issued by the Federal Administrative Court, however, slightly changes this definition. In the litigated case, a company organizing outdoor activities had been issuing vouchers in previous years. Some of these vouchers entitled the holder to access certain activities while other vouchers were issued for a specific amount of money. In this case the court decided that the vouchers issued for a specific amount of money did in effect fit the definition of a voucher as per the Swiss VAT practice. Interestingly, the vouchers issued for a specific activity in contrast were deemed to be payments in advance, arguing that both the applicable VAT and the place of supply of the underlying goods or services are known at the time of issue.
In its opinion, the Federal Administrative Court essentially stated that a distinction had to be made between a pure value voucher (“Wertgutschein”) and a service voucher (“Leistungsgutschein”). In the case of a value voucher, the value added tax is incurred only once it is redeemed, which is why value vouchers that have been sold but not yet redeemed (or expired) are not deemed to be a VAT-eligible transaction. On the other hand, service vouchers are to be qualified as advance payments, which is why the VAT is already due when the payment is received. Therefore, service vouchers that had been sold but not yet redeemed need to be included in the VAT statement. An important criterion of a service voucher is that it refers to a specifically determined service/goods that must be redeemed at a certain place and at a certain time.
Is this decision to be interpreted as a move toward EU VAT legislation where a distinction is made between single purpose vouchers and multi-purpose vouchers, and where each category has a different taxable outcome? Maybe, but as this is quite a new case, we recommend carefully tracking this topic. And of course we will keep you updated of any additional upcoming clarification that is published.
How to deal with the change
From now on companies offering vouchers must verify to which category their vouchers belong from a VAT perspective. The introduction of a VAT governance framework around vouchers is crucial because the time of declaration in the VAT returns must be precisely determined for each individual sale of vouchers to avoid any late declaration of VAT and assessment of default interest / penalties.
How KPMG can help
Our experts can help you review the contractual terms, conditions and characteristics of vouchers your company is dealing with to determine their correct VAT treatment.