On 21st December 2018 the Hungarian National Tax and Customs Administration (NAV) issued an official publication on VAT liability and invoicing obligations of vouchers. Although the publication issued by NAV cannot be applied as a law, those taxpayers who act in line with it are exempt from legal consequences determined by Act CL of 2017 on the Rules of Taxation. The full text of the interpretation is available in Hungarian through the link here.
When determining the VAT liability of vouchers, it is important to take into consideration that the voucher definition of the Act CXXVII of 2007 on Value Added Tax (“VAT Act”) does not necessarily correspond to the definition of vouchers in the traditional sense. For instance, according to VAT Act the electronic card may also qualify as a voucher while those membership cards on which the points received from previous purchases are taken into account during the next purchase cannot be considered as a voucher, which means that these cases are out of the scope of the VAT Act.
Similarly, vouchers issued free of charge (such as vouchers cut out from magazines) are not subject to VAT either.
The NAV interpretation defines the issuer of the voucher as a guideline which is not included in the provisions of the Act. Issuer should be understood as a taxpayer who sells the voucher (places it on the market) for the first time under its own name.
The VAT Act divides vouchers into two groups: single-purpose and multi-purpose vouchers. In the case of single-purpose vouchers the place of supply of the goods or services to which the voucher relates, and the VAT on those goods or services are known at the time of issuing the voucher, therefore VAT has to be applied to them. On the other hand, in the case of multi-purpose vouchers only their acceptance triggers VAT liability.
The appropriate distinction between vouchers is relevant not only in terms of VAT liability but also from invoicing obligation point of view. In the case of single-purpose vouchers invoice (receipt) has to be issued at the time of sale. If it is known what type of product or service can be bought with the single-purpose voucher, it has to be indicated in the invoice as well (for example book voucher). Furthermore, it is advised to display also the unique ID number of the voucher for easier identification.
If the single-purpose voucher is redeemed by a person other than the issuer, the redemption is not taxed, but supply of goods or services applies between the issuer and the supplier.
For example, a taxpayer (hereinafter: X Ltd) sells a clothing voucher which can be redeemed in clothing stores operated by X Ltd or by other taxpayers (hereinafter Y Ltd), as well, for HUF 5,000. This voucher qualifies as a single-purpose one, which means that tax liability of X Ltd arises at the time of selling the voucher. Let us assume, that a private person buys clothes from a clothing store operated by Y Ltd at a gross value of HUF 8,000. The buyer pays HUF 5,000 with a voucher and the remaining HUF 3,000 by cash.
In this case the Y Ltd (who accepts the voucher) receives HUF 5,000 from the issuer of the voucher (X Ltd). From VAT point of view Y Ltd performed a sale at a value of HUF 5,000 to X Ltd, and also fulfilled a sale at a value of HUF 3,000 to the buyer. Accordingly, Y Ltd issues two invoices: one for X Ltd and one for the buyer. (If the total gross price is paid with voucher, issuing an accounting document is enough, but there is no prohibition of issuing invoice/receipt). The invoice issued to the customer may include even the total (gross) amount, i.e. HUF 8,000. In this case the price paid with the voucher (i.e. HUF 5,000) has to be indicated separately as it is out of VAT scope.
We would like to draw your attention that further detailed rules should be applied when determining the VAT related liabilities of vouchers. The tax advisory team of BDO Hungary is at your disposal in this regard.