CJEU Case C-68/23: Digital vouchers and VAT - Clarifying the line between Single- and Multi-Purpose Vouchers

On 18 April 2024, the Court of Justice of the European Union (CJEU) delivered its judgment in case C-68/23, M-GbR v. Finanzamt O. The case addressed a fundamental question in VAT law: when are electronic vouchers subject to VAT, and under what conditions? Central to the case was the classification of vouchers under the VAT Directive as either "single-purpose vouchers" (SPV) or "multi-purpose vouchers" (MPV). This distinction is crucial, as it determines the timing of VAT liability and the treatment of the voucher at issuance, transfer, and redemption. The case concerned digital credits redeemable only within Germany, yet sold through a cross-border chain of distributors. The ruling carries far-reaching implications for the digital economy, particularly for platforms selling digital content via prepaid cards or codes.

Facts and Circumstances

In 2019, the German company M-GbR sold so-called "X-cards" via its online platform. These vouchers were prepaid codes that allowed users to top up their accounts on shop X to purchase digital content. Shop X was operated by the UK-based company Y. The vouchers were linked to specific countries via a country code – in this case, 'DE' for Germany – and, according to Y's terms and conditions, could only be used by customers with a German user account and a place of residence in Germany.

M-GbR purchased the X-cards through intermediaries established in other Member States. In its VAT returns, M-GbR treated the vouchers as MPVs, arguing that at the time of transfer, the place of supply and applicable VAT rate could not be determined with sufficient certainty. It argued that customers might circumvent territorial restrictions by, for example, registering a German account despite residing elsewhere, in order to benefit from lower prices.

The German tax authorities took the view that the vouchers should be classified as SPVs. According to the authorities, both the place of supply and the applicable VAT were known at the time of issuance because the vouchers were intended exclusively for the German market. The fact that some users might not comply with the usage conditions was irrelevant. The tax office therefore imposed an additional VAT assessment. After the lower court rejected M-GbR's objection, the Bundesfinanzhof referred preliminary questions to the CJEU.

Legal Framework

Since the introduction of Directive 2016/1065, vouchers are specifically regulated in the VAT Directive. Article 30a defines an SPV as a voucher for which, at the time of issue, both the place of supply and the applicable VAT are known. In such cases, VAT is due upon issuance or transfer. A voucher that does not meet these criteria is an MPV. For MPVs, VAT is only due upon redemption by the end user.

Article 30b of the Directive provides that each transfer of an SPV is treated as a taxable transaction. For MPVs, transfers are generally not taxed, unless they involve distinct services such as distribution or promotion. Article 58 is also relevant: it states that for electronically supplied services to non-taxable persons, the place of supply is the customer’s residence.

Legal Issue and Arguments of the Parties

The main legal issue was whether the fact that the vouchers were distributed through a cross-border supply chain between taxable persons in different Member States precluded their classification as SPVs. M-GbR argued that the place of supply could not be determined with certainty at issuance. Customers, it claimed, could register using false data or VPNs to benefit from price differences between Member States. Therefore, the VAT implications would not be sufficiently clear at the time of issue, and the vouchers should be considered MPVs.

The German tax authority and the European Commission argued that the objective nature and intended use of the vouchers was decisive. Given the country code and the binding terms of use, the vouchers were clearly restricted to Germany. Any user manipulation was irrelevant for legal classification. Thus, in their view, the requirements for SPV classification were fully met at the time of issue.

Judgment of the Court

The CJEU ruled that classification as an SPV must be based solely on objective characteristics present at the time of issuance. Two cumulative conditions must be met: (1) the place of supply must be known, and (2) the applicable VAT must be determinable. These criteria must be assessed independently of any potential or actual misuse by consumers.

In this case, the Court considered it plausible that the place of supply was Germany, given the ‘DE’ country code and usage restrictions. Whether the VAT rate was also predetermined – regardless of the type of digital content – was a matter for the referring court to assess.

The Court also confirmed that the fact that a voucher is transferred between taxable persons in different Member States does not affect its classification. The legal fiction under Article 30b(1), treating each SPV transfer as a supply, does not alter the analysis based on issuance.

If it turns out that the applicable VAT rate varies depending on the type of digital content, then the voucher must be treated as an MPV. In that scenario, VAT becomes due only upon redemption. The Court further emphasized that even MPVs can give rise to taxable transactions if there is an independent service, such as distribution or promotion. Whether M-GbR provided such services depends on its actual role in the supply chain.

Finally, the Court dismissed the relevance of earlier case law such as Lebara (C-520/10), which addressed prepaid telecom cards under the pre-2019 regime. That judgment concerned SPVs and does not contradict the current provisions of the VAT Directive.

Implications for Practice

This judgment has significant implications for businesses dealing with vouchers for digital services or goods, particularly in a cross-border context. The CJEU provides a clear test: the classification of a voucher must be based on objective, verifiable information at the time of issuance. The behaviour of end users is irrelevant; it is the issuer’s conditions and technical restrictions that determine VAT treatment.

Issuers must ensure that their terms of use and systems – including country codes and account verification – clearly define the place of supply. If both the place and VAT rate are known at issuance, VAT is due immediately. Otherwise, VAT arises upon redemption. Distributors must also assess whether their role includes taxable services, particularly in the case of MPVs.

Conclusion

The judgment in M-GbR v. Finanzamt O underscores the importance of legal clarity in the VAT treatment of vouchers. The Court confirms that classification depends exclusively on objective factors known at the time of issue. This provides legal certainty for both businesses and tax authorities across the EU. Companies using voucher structures must review their systems and conditions in light of these criteria to avoid the risk of reassessments or incorrect VAT reporting.