New stricter VAT rules on vouchers

New VAT rules on vouchers will come into effect from 1 January 2019. The new rules will introduce stricter requirements as to when VAT is to be paid, and they will affect vouchers issued by Danish shops. The necessary adjustments of invoicing and bookkeeping systems should be made already now.

The Danish Parliament is required to transpose provisions from the EU Directive on the VAT treatment of vouchers from 1 January 2019. The Directive will fundamentally change the way in which VAT has been charged on vouchers in Denmark until now. Under the current rules, a shop has only had to settle VAT on a voucher when the customer has redeemed the voucher. Moreover, the shop has not had to pay any VAT at all on vouchers that were never redeemed.

Under the new rules, VAT on so-called single purpose vouchers is to be paid already when a voucher is issued. Such vouchers are characterised by only being applicable for one purpose (ie the country where the goods or services are provided and the VAT rate are known when the voucher is issued). This applies both to a sale from the issuer to the distributor and to a subsequent sale by the distributor to the customer. On the other hand, VAT is not to be charged when the voucher is redeemed.

As most vouchers issued by Danish distributors can only be used in Denmark, and as there is only one VAT rate in Denmark, the change will affect most vouchers issued in Denmark.

From an economic point of view, the consequence of the new rules is that the issuer will no longer have a liquidity advantage due to it being possible to defer the payment of VAT until the date of redemption. The same applies to the advantage of VAT not having to be paid on non-redeemed vouchers.

The Danish Ministry of Taxation sent a draft bill on the amendment of the Danish VAT Act out for consultation before the summer holidays. The deadline for responding to the consultation document is 10 August 2018. As the amendment is based on an EU Directive, no significant changes are expected to be made when the bill is read in the Danish Parliament.

The amendment to the Act is to come into force on 1 January 2019, and invoicing and bookkeeping systems must have been adjusted by then. Accordingly, businesses issuing vouchers should start making the necessary adjustments already now.

Plesner will be able to advise on the new rules.

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