The Supreme Administrative Court of Sweden (Högsta förvaltningsdomstolen) has made a new reference for a preliminary ruling under Article 267 TFEU in Case C-436/24, Lyko Operations. The case concerns an interpretation of provisions of the VAT Directive (Directive 2006/112/EC).
The question is essentially whether a customer’s right to obtain additional goods from a company under a customer loyalty programme, depending on the size of the purchases which the customer has made with the company, constitutes a ‘voucher’? Furthermore, if it is a voucher, how is the taxable amount to be determined? In other words, is the company transferring vouchers to its customers and, if so, how the taxable amount should then be determined.
Background and facts
The company in this case, Lyko Operations AB, sells hair care and beauty products in physical shops and online. The company plans to design a customer loyalty programme and applied for a tax ruling to clarify how the programme should be treated for the purposes of VAT.
As part of its business operations, customers receive points for each ordinary purchase, which they can then redeem for goods in the company’s points shop. The points are not redeemable for money or purchasable for money. Points are personal and non-transferable. Over time, accumulated points are lost if not used. Thus, the company wants to know whether the loyalty programme, such as the one that operates, means that it is providing its customers with a voucher (multi-purpose voucher), or not.
Administrative decision
In Sweden, there is a Revenue Law Commission (Skatterättsnämnden) which makes decisions as part of the administrative process. In its decision, the Revenue Tax Commission stated that the loyalty programme that Lyko Operations have does not mean that the company transfers vouchers to its customers. It states that voucher is an instrument where there is an obligation to accept it as consideration or partial consideration, and that the purpose of a voucher is to act as a token – as proof that the holder has paid in advance for a supply of goods.
The company (Lyko Operations) does not agree with the Revenue Law Commission’s decision. The company is rather of the view that the points awarded to the customer under the loyalty programme constitute a voucher, and that the taxable amount in relation to the transaction arising when the points are redeemed is zero. To support this view, it states tha the definition of voucher in Article 30a of the VAT Directive includes no requirement that the customer has paid specifically for the instrument or that it can be assigned a specific monetary value. For the company, it states that it is sufficient that there is an obligation to accept the instrument as consideration for goods or services. A voucher thus differs from other means of payment.
As tax lawyers in Sweden will know, the Revenue Law Commission is unable to make references for a preliminary ruling by itself, as it found out the hard way in Case C-134/97, Victoria Film (I have argued previously that this judgment, stating that it was not a court or tribunal, was indeed the correct one – Butler (2023), as it is merely an administrative body), and so when it makes decisions, those decisions have to be challenged before a national court, upon which that national court may (or sometimes must) make a reference for a preliminary ruling.
Applicable EU tax law
Article 30a of the VAT Directive states the following:
‘For the purposes of this Directive, the following definitions shall apply:
1) ‘voucher’ means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument;
(2) ‘single-purpose voucher’ means a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher;
(3) ‘multi-purpose voucher’ means a voucher, other than a single-purpose voucher.’
Paragraph 1 concerns an instrument (voucher) where there is an obligation to accept it as consideration or part consideration, inter alia, for a supply of goods, and where the goods to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.
Paragraphs 2 and 3 concerns where the place of supply of the goods to which the voucher relates, and the VAT due on those goods are known at the time of issue of the voucher, the voucher is a single-purpose voucher, whereas other vouchers are multi-purpose vouchers.
Article 30b of the Directive states:
‘1. Each transfer of a single-purpose voucher made by a taxable person acting in his own name shall be regarded as a supply of the goods or services to which the voucher relates. The actual handing over of the goods or the actual provision of the services in return for a single-purpose voucher accepted as consideration or part consideration by the supplier shall not be regarded as an independent transaction.
Where a transfer of a single-purpose voucher is made by a taxable person acting in the name of another taxable person, that transfer shall be regarded as a supply of the goods or services to which the voucher relates made by the other taxable person in whose name the taxable person is acting. Where the supplier of goods or services is not the taxable person who, acting in his own name, issued the single-purpose voucher, that supplier shall however be deemed to have made the supply of the goods or services related to that voucher to that taxable person.
2. The actual handing over of the goods or the actual provision of the services in return for a multi-purpose voucher accepted as consideration or part consideration by the supplier shall be subject to VAT pursuant to Article 2, whereas each preceding transfer of that multi-purpose voucher shall not be subject to VAT.
Where a transfer of a multi-purpose voucher is made by a taxable person other than the taxable person carrying out the transaction subject to VAT pursuant to the first subparagraph, any supply of services that can be identified, such as distribution or promotion services, shall be subject to VAT.’
This article governs the way in which transfers of vouchers and the supply of goods in return for vouchers are to be regarded. It provides that the transfer of a single-purpose voucher entitling the holder to the supply of goods is to be regarded as a supply of the goods to which the voucher relates, whereas in the case of multiple-purpose vouchers it is the actual handing over of the goods in return for the voucher that is to be subject to VAT.
The necessity of a reference for a preliminary ruling
The referring court – a court of final instance – notes that the parties to the case have different views on several points, including as to how the definition of voucher in Article 30a of the VAT Directive.
It further notes that the provisions on vouchers were incorporated into the directive relatively recently and the case-law of the Court concerning the definition of voucher does not provide answers to the questions of interpretation raised in this case.
The referring questions/question
The questions in the reference that the referring court made was the following:
‘Q1: Does an instrument in the form of points – such as that at issue in the main proceedings – constitute a voucher as defined in Article 30a of the VAT Directive where the points are awarded under a customer loyalty programme designed in such a way that a customer who purchases goods obtains points according to the size of the purchases and is then entitled, when making a future purchase, to use the points to obtain further goods from the seller’s range?
Q2: If the answer to Q1 is [in the affirmative], how is the taxable amount under Article 73a of the VAT Directive to be determined when the points are used to obtain goods from the seller?‘
This has already been re-written by the Court to ask the following:
‘Must Article 30(a) of the VAT Directive be interpreted as meaning that a card, such as the one at issue in the main proceedings, which gives the cardholder the right to receive various services at a given place for a limited period of time and up to a certain value constitutes a voucher and, in such circumstances, constitutes a multi-purpose voucher?‘
The oral hearing for the case, if one occurs, will likely take place in 2025.
The referral
More on Case C-436/24, Lyko Operations before the CJEU can be found here.