How to Post & Tax Vouchers – simply explained

Gutscheine richtig buchen & versteuern | treibauf

Besides goods, more and more companies also sell vouchers that customers can use as payment. But what are the benefits? Which types of vouchers are there? What do you need to consider in terms of taxation? And how are vouchers posted correctly? treibauf answers the key questions.

Inhalt des Artikels

What makes vouchers so popular?

Voucher sales are growing. Especially as a strong instrument to increase customer loyalty, vouchers are becoming ever more popular among retailers each year. But even beyond that, gift vouchers offer companies plenty of benefits.

More liquidity through pre-financing

The most obvious benefit of a sold voucher (as opposed to a discount voucher) is having more money in the cash register sooner because the seller makes money immediately, without having to give anything in return. The redemption usually takes place much later.

According to a study by Ingenico, on average, voucher cards were used 68 days (FMCG) later, or in the case of small businesses even 138 days. Of course, this type of pre-financing also affects the accounting of vouchers.

Less returns

In many cases, vouchers are bought as gifts because they make it easier for the giver to please the recipient. For retailers, this effect has another major advantage: As the voucher recipient is free to choose, there are fewer returns – and the retailer saves the effort that comes with it.

Increased willingness to purchase more

There is another, purely psychological positive effect: since donees didn’t have to pay for the voucher themselves, their willingness to invest more than the amount of the voucher – and therefore to spend more than they otherwise would – increases.

The potential of snooze money

The amount of vouchers never redeemed should not be underestimated. According to a study by Ingenico, the share of vouchers never used ranges on average from around 9% among specialist stores to as much as 33% among smaller retailers.

This snooze money must of course be considered accordingly when accounting for vouchers. For example, the amount of unredeemed vouchers may only be accounted for after three years.

What challenges can vouchers bring?

The challenges with using vouchers are mainly a matter of redeemability across all channels (omni-channel capability) as well as the correct accounting and taxation of vouchers.

Omni-channel capability of vouchers

For companies with a combination of offline retail and e-commerce, the introduction of vouchers is somewhat more complex than for a little café around the corner.
Their customers expect to be able to purchase and redeem vouchers across channels (i.e. in the online shop and at the POS). For example, voucher cards purchased offline at the store are increasingly redeemed online.
This requires the storing of a respective cross-channel voucher system which needs to be integrated into the corresponding checkout architecture.
If the vouchers are cards that can be read out by terminals at the POS, the communication between the terminal and the cash register must be enabled by a suitable interface.

Challenges for accounting

The main difference between vouchers sold is the time when VAT is payable, which has always made it slightly more complicated to account for vouchers.
For more consistency, the EU Vouchers Directive  came into effect on 1 January 2019 for all member states, which distinguishes only between two types of vouchers sold.
We will explain how these two different types of vouchers can be accounted for.

What types of vouchers are there?

In the past, legislation distinguished between value vouchers and vouchers for goods. With the EU directive to standardise the taxation of vouchers this categorization changed: Since 1 January 2019, there is a distinction between single-purpose and multi-purpose vouchers, which are taxed at different times and also accounted for differently.

The single-purpose voucher

With single-purpose vouchers, at the time of sale two things must already established in advance:

  • The location where the voucher has been redeemed (country)
  • The tax rate for the service or product purchased with the voucher

The multi-purpose voucher

With a multi-purpose voucher, it is still unclear at the time of sale where and for what type of products or services the voucher will be redeemed.

What is the correct tax treatment of vouchers?

With regard to the tax treatment of vouchers we differentiate between single-purpose vouchers and multi-purpose vouchers. Read here about the definition of these two types of vouchers.

Taxation of single-purpose vouchers

For single-purpose vouchers, VAT is payable immediately upon the purchase of the voucher, i.e. it is considered an advance payment/deposit for a product or service. The actual service or redemption is then no longer taxed.

Taxation of multi-purpose vouchers

The multi-purpose voucher is not taxed at the time of sale, but only when redeemed. Therefore, VAT is only due once the customer redeems the voucher. The sale of the voucher is not yet to be posted as revenue.

What happens when a voucher isn’t redeemed?

If a voucher is not redeemed, the two types of vouchers are taxed differently:

  • With single-purpose vouchers, VAT liability rests with the issuer.
  • In the case of multi-purpose vouchers, the issuer is not liable to pay VAT.

How are vouchers accounted for?

The different tax treatment of these two types of vouchers has an immediate impact on how to account for these vouchers. Let us explain the rules on how to account for vouchers and the corresponding accounting records.

Accounting for single-purpose vouchers

For single-purpose vouchers, first the sale of the voucher is accounted for as revenue with the respective VAT.

  • First accounting step:
    Cash (debit) to revenue + VAT (credit)

This entry, however, does not take into account that the service has not yet been rendered (redemption of the voucher). To ensure that this open obligation is also documented in the books, document it as a liability and post it against a clearing account for vouchers.

  • Second accounting step:
    Clearing account vouchers (debit) to liabilities from vouchers (credit)

If vouchers are first introduce, setting up a voucher clearing account is obligatory. If the voucher is then redeemed, the liability can be removed.

  • Third accounting step (at the time of redemption):
    Liabilities from vouchers (debit) to voucher clearing account (debit)

Accounting for multi-purpose vouchers

For multi-purpose vouchers, the sale of the voucher is not yet to be posted as revenue. In this case, post the corresponding incoming payment in the cash register to the account “Liabilities from vouchers”.

Since this account does not yet exist in most account systems, it usually needs to be newly set up.

  • First accounting step:
    Cash (debit) to liabilities from vouchers (credit)

Once the voucher is redeemed by the customer, the revenue is posted at the time of redemption. Let us explain how to account for the redemption of the voucher.

  • Second accounting step:
    Liabilities from vouchers (debit) to revenue + VAT (credit)

Summary: Correct accounting of vouchers

  • Vouchers offer businesses a wide range of attractive benefits, from more customer loyalty to higher liquidity.
  • Larger companies should make sure that vouchers are redeemable across all channels. Posting vouchers can also mean additional work for financial accounting. We have described how digitalised accounting can significantly reduce the effort for your financial accounting.
  • Since 2019, a distinction has been made between single-purpose and multi-purpose vouchers, which differ in their tax treatment.
  • Single-purpose vouchers are posted as revenue at the time the voucher is issued (with the respective VAT).
  • In the case of multi-purpose vouchers the revenue and associated VAT is posted only once the voucher is redeemed.
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