Changes to the VAT treatment of vouchers

As of 1 January 2019 the VAT treatment of vouchers have changed in Ireland.

The purpose of this change is to harmonise the VAT treatment of vouchers across the EU. However, it is important to note that the changes to the VAT treatment of vouchers only apply to vouchers which can be used for redemption against goods or services.

Prior to this change vouchers are not subject to VAT on issue to a consumer in Ireland. VAT arose when the voucher was redeemed to acquire goods and services.

Under the new rules there are two different types of vouchers, a “single-purpose” voucher and a “multi-purpose” voucher.

A “single-purpose” voucher is defined as a voucher where the place of supply of the goods or services to which the voucher relates and VAT due on those goods or services, are known at the time of issue of the voucher. This applies to vouchers which can only be redeemed by a supplier for a particular good or service.

The issue of a single-purpose voucher is treated as a supply of goods or services and VAT is chargeable when the voucher is issued.

A “multi-purpose” voucher is any voucher which is not a single-purpose voucher. This would include a voucher which can be redeemed against goods and services with different VAT rates and by a variety of suppliers. VAT is not charged on the issue of “multi-purpose” vouchers. VAT arises when “multi-purpose” vouchers are redeemed for goods or services.

It is envisaged that the above changes may principally affect retailers, certain telecom providers, online businesses and some software companies.

Should you have any queries in relation to the implications of the above amendments on your own business please contact a member of our tax team.