Do loyalty program points qualify as vouchers?

The Court of Justice of the European Union (CJEU) will soon address the issue of loyalty programmes in which customers collect points redeemable for rewards or discounts (Case C-436/24, Skatteverket v. Lyko Operations AB). The Court will assess such programmes in light of VAT rules on voucher taxation and determine whether the allocation of points constitutes the issuance of a voucher and whether the redemption of accumulated points is a VAT-taxable transaction.

Before the CJEU issues its ruling, however, an insightful opinion has already been delivered by the German Advocate General, Juliane Kokott.

Background of the case

Case C-436/24 concerns Lyko Operations AB, a Swedish company selling cosmetics both in physical stores and online. The company intends to launch a loyalty programme that customers can join free of charge. For each purchase, customers would receive points that could later be redeemed for selected goods—but only in connection with a subsequent purchase. The rewards would come from Lyko’s standard assortment, typically low-value products, though subject to different VAT rates.

Lyko applied to the Swedish tax authorities for a VAT ruling, including whether the points should be regarded as multi-purpose vouchers and how to calculate the taxable base. The tax authority concluded that the points do not qualify as vouchers. The company appealed, and the administrative court referred two preliminary questions to the CJEU concerning: (i) whether points granted under such a programme qualify as vouchers, and (ii) how to determine the taxable base of points redeemed for goods.

Opinion of the Advocate General

The Advocate General emphasised that the VAT Directive defines a voucher through two cumulative conditions:

• the voucher or its terms of use must indicate either the goods to be supplied or the potential supplier;
• there must be an obligation to accept the instrument as consideration for the supply of goods/services.

According to the Advocate General, the second condition is decisive – it distinguishes a voucher from a mere discount. In the Lyko case, this condition was not fulfilled. A voucher must be accepted by the supplier as consideration and exchanged for goods/services without additional requirements. Here, however, points can only be redeemed in connection with another purchase, which means the company is not obliged to accept them unconditionally. The lack of this condition excludes loyalty points from the definition of a voucher under Article 30a(1) of the VAT Directive.

The opinion also draws an interesting parallel to stamp cards, e.g. for coffee: “a so-called stamp card, by means of which, after ten purchases (indicated by stamps), the eleventh purchase is free of charge, may thus now constitute a voucher for the supply of the eleventh item. The decisive factor is ‘only’ whether the eleventh item must be supplied independently or whether that is possible only in combination with the eleventh purchase (buy two, pay for one). The latter would then only be a discount on the eleventh purchase.”

The Advocate General further stressed that a voucher does not need to represent a fixed monetary value or be purchased for a specific cash amount. She also noted that loyalty points are not received entirely free of charge—customers indirectly “pay” for them when purchasing goods. Accordingly, points are linked to a value, even though that value can only be determined at the moment of redemption.

Voucher or Discount?

The key factor in assessing VAT consequences is whether the points granted to customers:

• can only be redeemed in connection with a further purchase, or;
• can be redeemed independently (without requiring an additional purchase).

In the first scenario, as in the Lyko case, points cannot be classified as vouchers because goods/services cannot be acquired solely by redeeming them. Instead, they function as a discount on future purchases.

In the second scenario, if points could be redeemed independently – regardless of any further purchase – they could qualify as vouchers within the meaning of VAT law. This conclusion also applies to other forms of loyalty schemes, such as coffee stamp cards entitling customers to a free eleventh coffee.

Vouchers in the Polish VAT system

Special VAT rules for vouchers have applied in Poland since 2019. Under the VAT Act, a voucher is an instrument that can be used as payment (in full or in part) for goods or services from a specified supplier.

Two types of vouchers are distinguished:

• Single-purpose vouchers (SPVs) – at the time of issue, both the place of supply and the applicable VAT rate are known. Example: a voucher redeemable solely for a service taxed at 23% VAT in Poland.
• Multi-purpose vouchers (MPVs) – at the time of issue, it is not possible to determine either the place of supply or the applicable VAT rate. Example: a voucher redeemable for various goods subject to different VAT rates.

The conclusions drawn by Advocate General Kokott in her opinion are therefore consistent with the Polish VAT framework.

How can we support you?

The Advocate General’s position, which may soon be confirmed by the CJEU itself, calls for careful analysis of loyalty programmes and the tax consequences they create. We support taxpayers in planning, implementing, and reviewing loyalty schemes to ensure their compliance, accuracy, and efficiency in VAT settlements. Please feel free to contact us – we will be glad to examine whether your planned or existing loyalty programme is accounted for correctly and effectively.