The case  

Company A issues and sells cards which give the cardholders the right to buy goods or services (e.g., in restaurants) with discount. Before 1999, the cards qualified (according to a resolution of the Dutch State Secretary for Finance) as gift vouchers, the supply of which was exempted from VAT.

The resolution, however, has been changed. Since then the cards no longer qualify as gift vouchers.

In 2005, the tax inspector carried out a tax audit at company A which resulted in an additional VAT assessment. In the opinion of the tax inspector, the supply of the cards by Company A is no longer VAT-exempt.

The considerations

The question is if the cards qualify as "other securities" or "other negotiable instruments" the supply of which is exempted from VAT.

According to the Dutch district court, restrictive interpretation of the term "other securities" leads to the conclusion that the cards do not qualify as such. According to the district court, the cards do not also qualify as "other negotiable instruments" because only valuable papers with the same function as cheques qualify as "other negotiable instruments." As a result, the supply of the cards is no longer VAT-exempt.

The Dutch Court of Appeal concludes that a wider approach of the term "other securities" and "other negotiable instruments" should be possible. On one hand, documents representing goods and (in Dutch legal practice) gift vouchers and multifunctional telephone cards can be considered as "other securities." On the other, the qualification by the Supreme Court in 1998 of the cards as (partial) payment for food and drinks makes a less restrictive approach of the term "other negotiable instruments" possible.

However, Court of Justice of the European Union (CJEU) case law, parliamentary history and literature do not provide a decisive answer. Therefore, the Court of Appeal asked the CJEU preliminary questions.

The preliminary questions  

In summary, the three preliminary questions are as follows:

  • Do the cards, being transferrable cards used for (partial) payment of goods and services, qualify as "other securities" and if so, is the supply of these cards therefore VAT-exempt?
  • Do the cards, being transferrable cards used for (partial) payment of goods and services, qualify as "other negotiable instruments" and if so, is the supply of these cards therefore VAT-exempt?
  • In case the cards qualify as either "other negotiable instruments" or "other securities," does the fact that the payment of VAT when the card is used by the cardholder is practically illusory, play a role in view of the question on whether the supply of the cards is VAT-exempt?

Conclusion

The Court of Appeal concludes correctly that the outcome of this procedure is uncertain. We have to wait and see if the CJEU follows the restrictive view of the district court or the wider view of the court of appeal.