Guidance/interpretation: VAT implications resulting from the participation in loyalty programmes

This Note clarifies the VAT implications resulting from the participation in loyalty
programmes based on the current provisions of the VAT Act. This Note does not
attempt to list and analyse all the loyalty programmes available. Loyalty programmes
differ from each other, evolve and change because of continuous changes in market
conditions, competition etc. For this reason, the general VAT principles applicable to
loyalty programmes as contained in this Note must be analysed and subsequently
applied to each transaction in a loyalty programme in accordance with that specific
loyalty programme’s characteristics or nature.
Notwithstanding that this Note may in certain instances highlight the VAT implications
of other benefits generally associated with loyalty programmes, the main focus of this
Note is to address the VAT implications of points-based loyalty programmes.
More specifically, this Note concentrates on loyalty programmes that regard loyalty
points as a form of payment or part-payment for goods or services, in line with the
nature of loyalty points as set out in 4.3. Should any of the agreements referred to in
4.1 contain provisions that specifically contradict this, for instance where the relevant
agreements evidence loyalty points to be regarded as a discount on future purchases,
this Note does not apply to the specific circumstances.
All examples contained in this Note are based on the assumption that the relevant
parties of a loyalty programme are all vendors.
The policies and further applications associated with vouchers, tokens or stamps are
not discussed in detail in this Note.

Source: gov.za

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