5 March 2019

Amendment to VAT Act: Are meal vouchers liable to VAT?

The tax package returned by the Senate to the Chamber of Deputies, to be discussed again on 12 March 2019, contains, among other things, the implementation of the Vouchers Directive. This directive regulates the rules under which the VAT regime for vouchers is determined. A widely-discussed issue is what vouchers actually fall into the category of vouchers under the new directive. Are common meal vouchers to be viewed as vouchers for VAT purposes?

Veronika Výborná
Petra Němcová

An amendment to the VAT Act defines a voucher as a document associated with the duty to accept it as consideration for the delivery of goods or services. It must also be evident from the voucher what goods or services will be delivered and by whom.

The explanatory report to the amendment to the VAT Act specifies that the new rules do not apply to discount vouchers that authorise their holders to obtain a discount from the price of purchased goods or services but not to receive specific goods or services for such a voucher. In our opinion, the specification of discount vouchers deserves clarification. The explanatory report provides examples of discount vouchers, e.g., vouchers with a value of CZK 100 that consumers acquire free of charge from advertising flyers and that they may use when purchasing goods in shops, or coupons authorising their holders to acquire a second product free of charge when submitting them at fast food outlets.

Whether meal vouchers meet the definition of vouchers liable to VAT is becoming increasingly topical, as the expected deadline for passing the tax package is approaching. The interpretations regarding the VAT regime on meal vouchers may indeed affect a large number of employers, catering service providers, and distribution and retail networks.

If meal vouchers represent vouchers liable to VAT, the VAT regime will depend on whether they are single-purpose or multi-purpose vouchers, i.e. whether a voucher can be used to acquire goods or services liable to a single VAT rate. This voucher classification must already be made at the moment vouchers are issued, since it is essential not only for applying the right VAT regime on vouchers but also on services related to their distribution (especially commission generated by companies issuing vouchers and potential distributors). The specification of the VAT regime is also crucial for claiming the entitlement to VAT deduction by the concerned providers.

However, deciding what VAT rate should be applied on goods or services acquired for meal vouchers is not a simple task, as the range of goods or services is quite varied (meal services vs purchases of groceries at retailers) and the current legislative development quite turbulent. For example, a motion to amend the tax package proposed by the Senate contains a proposal to reduce the VAT rate on meal services to 10%. Theoretically, if meal vouchers today represent single-purpose vouchers, then once the VAT rate on meal services is reduced, will they then be regarded as multi-purpose vouchers in accordance with the new regulation?

To find an answer to the question on how to treat meal vouchers under the new amendment is the objective of two contributions submitted to the March Coordination Committee, i.e. a professional platform of the representatives of the Chamber of Tax Advisors and the General Financial Directorate focusing on legislation discrepancies. Hopefully, once spring comes along, we will know more.

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