The Vouchers Directive, which regulates the VAT treatment of vouchers across the EU Member States, was agreed upon by the Council of the EU in 2016, and caught the attention of Romanian authorities, tax advisors, and businesses at the end of 2017. Together with other Member States, Romania must design and enforce an appropriate legal framework to ensure the application of the Directive starting in 2019.
Now comes the hard part: making the new rules work in real life. This is still a work in progress, at least in Romania.
Who is Directly Affected by the Vouchers Directive?
The new rules will apply to every taxable person who deals with vouchers used as partial/full con-sideration for supplies of goods and services, i.e. issuers, distributors or intermediaries and re-deemers.
What is the Vouchers Directive About?
The Directive now defines a voucher as “an instrument where there is an obligation to accept it as consideration or 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 in-strument itself or in related documentation, including the terms and conditions of use of such in-strument.”
The Directive then defines single-purpose vouchers (SPVs) and multi-purpose vouchers (MPVs) and sets rules for determining when VAT is due for each. At the moment of issuance, an SPV al-lows identification of the goods and services against which it can be redeemed, while an MPV does not. This means that SPVs allow for the application of VAT upon their issuance/sale, whereas MPVs allow for the application of VAT only upon redemption, when the VAT liability can be identi-fied.
In theory, the Vouchers Directive aims to clarify and harmonize the VAT treatment of vouchers throughout the European Union to avoid inconsistencies which in the past may have led to double taxation, non-taxation, or other complications.
In practice, it gives rise to a whole new set of practical questions to which the Romanian regulator is still contemplating the appropriate response.
The first issue is the correct qualification of a voucher into an SPV, an MPV, or another form not covered by the Voucher Directive. This is of course relevant for identifying the correct moment one is required to levy VAT.
Next is adapting ERP systems (especially POS infrastructure) to differentiate between the various types of vouchers that may be received from one’s customers at any given time and then training the relevant personnel to properly input the data at the moment of sale.
The third issue refers to SPVs used for the partial settlement of the price of redeemed goods and services sold to consumers. As for VAT purposes the supply of those goods and services is split in-to two transactions (with two separate tax points), and as the existing cash register legislation does not allow this split, it is especially complicated to account for split payments using existing cash registers, ensure that VAT is not collected twice for the same goods and services, and ensure that customers who are VAT taxable persons do not claim more input VAT credit than they should.
We expect that the practical application of these new provisions will yield other issues for which the Romanian regulator will need to find solutions.
Are You Not Entertained?
Still more is on the way to keep Romanian taxpayers on their toes. The first expected development is the implementation of the profit tax group, currently not available in Romanian tax law, which we see as an important step forward. In this context, Romania will of-fer more than a low taxation system and several tax incentives and tax breaks for investors and may in fact become a holding alternative in the SEE.
Second, a major overhaul of the EU VAT system is in the works, which we expect will impact both businesses and administrations as early as 2020.
By Theodor Artenie, Managing Tax Director, and Alexandra Barbu, Senior Tax Consultant, Schoenherr Romania
This Article was originally published in Issue 5.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.