VAT Treatment of Loyalty Points: Discounts vs Vouchers After ECJ Case

A recent Advocate General opinion in ECJ Case C 436/24 Lyko Operations AB addressed important VAT questions regarding how loyalty points should be treated for tax purposesThe case involved Lyko, a Swedish retailer with a loyalty scheme where customers earn points on purchases that can only be redeemed with new purchases and cannot be transferred or have independent monetary valueThe key question was whether these loyalty points qualify as VATable vouchers or should be treated as discounts, which determines when VAT is due and how much tax appliesThe AG opinion concluded that loyalty points do not qualify as vouchers under EU VAT Directive but are effectively discounts on future purchases, requiring part of the original purchase price to be allocated to the pointsFor businesses, this means loyalty scheme structure directly affects VAT treatment, requiring accurate accounting to allocate value between sales and rewards, plus clear program terms and proper tracking systems to ensure compliance

Source: meridianglobalservices.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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