VAT – Revenues may only be reduced by bonus points once they have been redeemed
In the case requiring clarification, a retailer (the claimant) had offered its customers the chance of taking part in the bonus and rebate programme of an external company. The participating customers were given a points account where they were credited with one point (worth one cent) for each € 2 that they spent on purchases. In 90% of cases, the points that had been collected by the customers were redeemed once again for a subsequent purchase. The points that had been collected and redeemed by the customers were settled between the retailer and the external programme provider via monthly “points clearing”. The retailer treated the points that had been issued for its customers and the corresponding amount that was owed for this (that had been determined via “points clearing”) as a reduction in the VAT charge.
The local tax office was of the opinion that the VAT charge should not be reduced because the promotional expenditure in respect of the points programme was negligible under VAT law. The Munich tax court had upheld the case. The BFH however, in its ruling from 16.1.2020 (case reference: V R 42/17), decided that the retailer’s VAT assessment base could be reduced, although not during “points clearing”.
The BFH was of the opinion that the reduction could only happen once the customer had actually redeemed the points. This is because, according to ECJ case law, when granting discounts the assessment base can only be changed once the customer has actually been credited with the points.
Please note: The BFH referred the matter back to the tax court that, in a second hearing, will now have to clarify the extent to which the customers have actually redeemed the points awarded to them for a second purchase.