Germany: Federal Fiscal Court: transfer of vouchers in distribution chains

Since 1 January 2019, special taxation rules have applied to vouchers. Due to different taxation consequences, a distinction must be made between so-called single-purpose vouchers (cf. Section 3 paragraph 14 German VAT Act) and so-called multi-purpose vouchers (Section 3 paragraph 15 German VAT Act) when issuing or transferring vouch­ers. A single-purpose voucher is assumed if the place of the supply of goods or services to which the voucher relates and the VAT due for these transactions are definite at the time the voucher is issued. For single-purpose vouchers, VAT is therefore already incurred when the voucher is issued or transferred, whereas for multi-purpose vouch­ers, the actual redemption and the associated purchase of goods and services leads to the incurrence of VAT.

In a decision dated 16 August 2022 (XI S 4/21) on the suspension of the enforcement of a tax assessment, the Federal Fiscal Court expressed doubts regarding the criteria for classification as a single-purpose voucher.

The applicant sold credits in the form of voucher cards or voucher codes, which enabled the acquiring private individuals to top up their user accounts and thus acquire digital content. The supply of these services, which from a VAT perspective are indisputably to be regarded as services provided electronically, was carried out by another entrepreneur from whom the applicant acquired the vouchers via another intermediary.

Contrary to the applicant's opinion, the tax office treated the vouchers as single-pur­pose vouchers, because the determinability of the place of performance shall only be required for the supply for which the voucher was intended, i.e. the stage of selling the voucher to the customer, cf. Section 3.17 paragraph 2 clause 1 German VAT Application Directive (UStAE). Since the redemption of the vouchers by the customers should in principle only be possible in the country in which they reside, both the place of the supply of the service to which the voucher relates and the VAT due for these transac­tions would already be determined at the time the voucher was issued or transferred.

Although the Federal Fiscal Court considers the view of the tax office to be basically covered by the wording of Section 3 paragraph 14 clause 1 German VAT Act, it never­theless has serious doubts about this interpretation: this is because if a trader transfers a single-purpose voucher in their own name, the transfer of the voucher is also to be regarded as the supply of the goods or services to which the voucher relates, cf. Section 3 paragraph 14 clause 2 German VAT Act. Thus, in the case of single-purpose vouchers, the fact that the place of supply has to be definite could also include the sales stages of the voucher that may precede the sale of the voucher to the customer, e.g. via the issuer/maker, any other transferring traders and the dispenser of the voucher. If an overall view of the chain of transfers of the voucher up to its dispensation were to be taken, a single-purpose voucher could only be assumed if the place of supply (for the service finally obtainable through the voucher) for each transfer of the voucher and also the final issue of the voucher were in the same Member State. Other­wise, the criterion of the "place of performance" pursuant to Section 3 paragraph 14 clause 1 of the German VAT Act would not be fulfilled and a multi-purpose voucher would have to be assumed.

In the case in dispute, this overall view of the chain would lead to the transfer of the vouchers between the issuer and the transferring traders being taxable in a different Member State than the issuing of the vouchers by the applicant to its customers. The background to this is that the determination of the place of supply for services provid­ed electronically between entrepreneurs is governed by Section 3a paragraph 2 of the German VAT Act, resp. Art. 44 VAT Directive, whereas in the case of the purchase of such services by private individuals, their place of residence is decisive (Art. 58 VAT Directive).

The decision was issued in interim relief and the further clarification of the doubts raised by the Federal Fiscal Court is reserved for the pending appeal proceedings (XI R 21/21).

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