Background: Currently there are no EU VAT rules on how transactions involving vouchers should be dealt with. In the absence of common rules, Member States have developed their own practices. These are not coordinated and frequently cause problems for businesses and VAT collection. When a voucher is issued in one Member State and used in another, it is not always clear at what point the transactions linked to the voucher should be taxed. This is, for example, the case for international hotels promoting accommodation through vouchers in several EU Member States.

The objective of today's proposal is to clarify and harmonise the EU rules on the VAT treatment of vouchers. This will have a positive effect on businesses by eliminating situations of double taxation and uncertainty about tax compliance obligations. It will also help to close loopholes which facilitate tax avoidance by certain companies exploiting the mismatches between Member States. The new rules also fit well in the broader strategy of the Digital Agenda Europe, especially its objective to create a digital single market.

Firstly, the Commission proposes to harmonise the definition of vouchers for VAT purposes and the point of taxation for voucher transactions, to prevent mismatches which result in double taxation or double non-taxation. The time of taxation will be determined by the nature of the voucher, thereby clarifying if the tax should be charged when a voucher is sold or when it is redeemed for goods and services.

Secondly, the new rules draw a clear line between vouchers and other means of payment. The growing number of mobile devices makes it necessary to distinguish between prepaid telecom credits (which are vouchers) and mobile payment services (which are taxed differently). Changes in payment technology, notably the increasing use of mobile payments, require that any room for confusion is removed.

Thirdly, the Directive sets up common rules for the distribution of vouchers in a chain of intermediaries, especially where this extends across two or more Member States. A phone card for example can change hands several times in a distribution chain before it reaches the consumer and the businesses concerned need certainty about their tax obligations.

A number of other technical measures are included to deal with the right of deduction, redemption and reimbursement procedures, the person liable for payment of the tax and other obligations for businesses.

The Commission proposal is accompanied by an Impact Assessment. It concludes that the only effective way to deal with the identified shortcomings is to include the new provisions for vouchers in the VAT Directive.