Proposed new VAT rules for vouchers

On June 27, 2016 the Council of the European Union adopted directive 2016/1065 amending Directive 2006/112/EC regarding the value added tax treatment to vouchers. New voucher rules simplify and harmonize the value added tax (VAT) rules applying to vouchers (e.g., public transport ticket, entrance ticket to cinema and museum, gift cards). Latvia, as well as other EU Member States, should have implemented the new voucher rules in the Value Added Tax Law until December 31, 2018.

The Ministry of Finance has drafted amendments in the VAT Law but they have not been accepted by the Parliament yet.

The current VAT treatment of vouchers

According to the VAT Law, VAT should be applied to voucher at the taxation period when it is sold to user irrespective of time when the voucher is redeemed to acquire goods or services.

Application of the new rules

In the VAT law will be implemented new definition of “voucher” and defined two different types of vouchers – “a single-purpose” voucher and “a multi-purpose” voucher. According to the Directive 2016/1065 (identical provisions should be implemented in the local VAT Law), “voucher” means an instrument according to which there is an obligation to accept it as a consideration or a partial consideration for a supply of goods or services and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.

“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 the VAT due on those goods or services, are known at the time of issuance of the voucher. For example, transport ticket, admission tickets to different type of events.  This type of voucher shall be subject to VAT when it is issued.

“A multi-purpose” vouchers are considered all other vouchers that are not “single-purpose” vouchers. This means any voucher which can be redeemed against goods or services with different VAT rates and from different suppliers. For example, shopping center or bookshop gift voucher, as this voucher can be redeemed against goods and/or services which are subjects to different VAT rates. This type of voucher shall be subject to VAT when it is redeemed for goods or services and not when it is issued.

Thus, in order to determine VAT treatment on voucher the taxpayer should determine first what type of voucher is supplied to a client.

When new voucher Directive 2016/1065 rules should be applicable?

Latvia, the same as other Europe Union countries, should have implement Directive 2016/1065 as to VAT treatment on vouchers into VAT Law by December 31, 2018 at latest. These new voucher rules had to be applied from January 1, 2019 on all vouchers issued after December 31, 2018.

Latvia have not yet implemented this directive. In the case when directive rules are not implemented in the national legislation the taxpayer has right to apply directive rules directly.

Business involved with the issuing, usage or redemption of vouchers should review these new rules to understand how they will be affected by them (e.g., invoice issuing, cash flow effect).

If you would like to discuss the impact of these changes in more details or you would need our assistance in order to evaluate how the changes will affect your business, please get in touch with a member of Leinonen tax team!


Information prepared by Leinonen Latvia, Tax & Legal advisory departmen

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