Decision of the German Federal Fiscal Court dated 8 September 2011 (V R 42/10)

The German Federal Fiscal Court recently published a decision concerning the provision of hotel vouchers. In the case in question, the plaintiff sold vouchers which customers could redeem for accommodations at specific hotels in Germany and in foreign countries. The respective hotels did not additionally charge for hotel accommodation, only the provided restaurant services. The customer could choose the respective hotel at a later stage after the purchase of the voucher, but he had to inform the plaintiff about his final choice.

In this case, the German Federal Fiscal Court decided the following:

  • The sale of vouchers qualifies as a procurement service (i.e. procurement of hotel accommodation) which is rendered in exchange for an advance payment of the customer.
  • This procurement service has to be taxed in Germany in the month in which the sale of the voucher (and not the redemption) took place.
  • However, if it subsequently turns out that the customer redeemed the voucher for accommodation at a hotel located in a foreign country, the procurement service is not taxable in Germany (place of taxation is where the hotel is located) and respective VAT adjustments have to be made retroactively.   

Quite surprisingly, the German Federal Fiscal Court decided that there is a VATable event at the time the voucher is sold. The procurement service is not sufficiently specified at this time in order to clearly identify the appropriate VAT treatment (i.e. whether it is in the scope of German VAT or not). This is not totally in line with the former German and European case law which prevailingly stated that the sale of vouchers qualified as an exchange of means of payment (i.e. not relevant for VAT) if the service for which the voucher will be redeemed is not sufficiently specified at the time of sale. A difference to other case was that in the case at hand the court referred to the procurement service rather than to the service for which the voucher will be redeemed (in this case, for hotel accommodation). Still it is not quite clear to us why the German court saw a taxable procurement service already in the moment the voucher was sold although its tax place was not yet clear.

There is not a fully consistent approach in Germany towards the treatment of vouchers anyway. This case, in our view, provides for additional uncertainties.

The future German and European case law concerning vouchers has to be further monitored in order to identify VAT risks and the adequate VAT treatment of the use of vouchers in each individual case. In particular, the proceeding currently pending before the ECJ which also deals with this topic (Lebara Ltd., C-520/10) might help clarify the VAT treatment of vouchers on an EU level.