The Supreme Court confirms that VAT must be paid even though the consumer does not purchase the service.
Internet auction
The case concerns the operator of an internet auction. On the website, consumers can bid on products offered by other operators (e.g. trips or packages). The consumer who is the winner of the auction has to pay the agreed fee within 5 days and then receives a voucher with a code from the operator. With that voucher, the winner must order or book the purchased service via the operator's website. This must be done within the specified time limit. Once a performance has been ordered or booked, the operator of the internet auction buys this performance from the provider.
No show
Between 4% and 16% of the vouchers won will not be redeemed. The winner is then not entitled to a refund of the amount paid to the internet auction operator. The tax authorities are of the view that the internet auction operator must then still pay VAT from the amount received.
The Supreme Court agrees. Because the performance purchased by the winner is sufficiently precise, it is a prepayment. VAT is then due not at the time the performance is carried out, but at the time the advance payment is received.
The finding of an advance payment is not altered by the fact that a deadline is imposed on the winner, within which an action must be taken to enforce the right to performance.
Hospitality coins
Perhaps the most well-known similar situation concerns catering tokens. These are not regarded as advance payments, which means that VAT is only due when the drink or food for which the coins are paid is supplied by the operator. When catering tokens are issued, it is not yet known with sufficient precision what will be purchased with them (e.g. whether it is an alcoholic drink taxed at the normal VAT rate or a service taxed at the reduced VAT rate).