CJEU judgment: loyalty points not vouchers for VAT
05/03/26
Today, the Court of Justice of the EU (“CJEU”) released its judgment in the case of Skatteverket v Lyko Operations AB (C-436/24). The central question of the Swedish referring court was whether the Lyko customer loyalty points qualify as VAT-relevant vouchers and if so, how to determine the VAT taxable amount. In line with the earlier opinion of A-G Kokott, the CJEU ruled that the loyalty points in question do not constitute vouchers for VAT purposes. Instead, these points should be treated as a discount on a future purchase.
What does this mean for your organisation?
The judgment in the case of Lyko Operations AB ('Lyko') confirms that many loyalty schemes (e.g. based on “points”) may fall outside the EU voucher regime, depending on their specific structure and conditions. Where such instruments simply entitle the customer to a discount or bonus in connection with a future purchase, the specific VAT rules for single‑purpose and multi‑purpose vouchers, and the associated rules for determining the VAT taxable amount, do not apply. Instead, these instruments are generally treated as price reductions of the underlying supplies. In practice, this typically means that the full price of the initial purchase is subject to VAT. When a discount is subsequently used (e.g. points redeemed or a coupon applied), the VAT taxable amount of that subsequent supply is reduced accordingly i.e. VAT is based on the actual payment. Unredeemed discounts or points usually have no independent VAT consequences, as there is no adjustment to the initial VAT taxable amount if the right to a discount is never exercised.
Conversely, schemes in which points or credits can be used as full or partial payment, and where there is a contractual obligation on suppliers to accept them as such, are subject to the voucher rules and may require a more complex VAT analysis. The Lyko judgment leaves open key questions around this distinction and on the practical implications of using multi-purpose vouchers. If your organisation issues or accepts instruments such as vouchers or coupons we advise you to reassess the VAT treatment of those instruments.
Background
Lyko is a Swedish retailer of hair-care and beauty products and planned to launch a customer loyalty programme. Under this programme, customers could join free of charge and earn loyalty points with each purchase. These points could later be used to obtain products from a dedicated “points shop”, but only in connection with a new purchase of regular assortment goods. The products obtainable in this points shop are generally of low value (not normally exceeding approximately SEK 500, or around EUR 50) and can be subject to different VAT rates, for example 25% for cosmetics and 12% for certain food supplements.
The Swedish Revenue Law Commission ruled that these points do not constitute vouchers, as they lack a specific monetary value and are not purchased separately. Both the Swedish tax administration (Skatteverket) and Lyko appealed to the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden). The tax administration argued that the points merely entitled customers to choose an extra article once they had purchased goods for a certain amount and thus were not vouchers. Lyko argued that the points should qualify as vouchers and that the taxable amount upon redemption was SEK 0. The Swedish Supreme Administrative Court considered that there was uncertainty as to how the EU definition of “voucher” should be interpreted in relation to such loyalty schemes and referred two questions to the CJEU.
- The first question concerns whether points awarded under Lyko’s customer loyalty programme constitute a “voucher” within the meaning of the VAT Directive.
- The second question, which is only relevant if the first is answered in the affirmative, concerns how the VAT taxable amount should be determined when such points are redeemed for goods.
Judgment of the CJEU
As regards the first question, the CJEU points out that a “voucher” is defined as an instrument that (i) is associated with an obligation to accept it as full or partial consideration for a supply of goods or services, and (ii) indicates the goods/services to be supplied or the potential suppliers, either on the instrument or in related documentation.
The CJEU focused on the first element of the definition: the existence of an obligation for the supplier to accept the instrument as full or partial consideration for a supply of goods or services. Instruments that simply give the holder a right to a reduction in price or a discount are not covered by the voucher provisions. Considering that the Lyko points can only be redeemed when simultaneously purchasing another product, the CJEU held that there is no obligation for the supplier to accept the Lyko points as consideration for a supply.
Since these points do not qualify as “vouchers” for VAT purposes, the CJEU deemed it unnecessary to examine the second question on the VAT taxable amount under the multi‑purpose voucher rules.
Commentary on the judgment
The CJEU reaffirms that discount instruments fall outside the scope of the voucher rules. However, the CJEU does not provide guidance on how to distinguish between these instruments beyond the specific Lyko points at hand. A-G Kokott argued in this case that discount instruments merely reduce the price when a customer makes a further purchase and act as an incentive for that subsequent supply. Conversely, a voucher must create a self-standing obligation for the supplier, triggered solely by the customer, to accept it as consideration. A key characteristic of a voucher is its independent usability by the holder as consideration, according to the A-G. The CJEUs short reasoning leaves that discussion largely untouched.
The CJEU does not address the second question on the VAT taxable amount. The AG devoted substantial analysis to these issues, including a discussion of unredeemed points and how the VAT taxable amount of the initial purchase should or should not be split between the underlying goods and the loyalty element. She also explained that, in her view, the earlier CJEU case in Kuwait Petroleum (C-48/97) does not compel treating such points as “gifts” and that points earned based on the price of the purchase are economically paid for, even if they appear “free of charge”. In Lyko, however, the CJEU did not develop this reasoning. This means that Member States may continue to adopt divergent approaches, resulting in potential disputes.
For the Dutch practice, guidance can be found amongst others in the Dutch policy decree on the VAT treatment of various loyalty instruments. This Decree distinguishes vouchers, discount instruments requiring a top‑up payment (‘waardebonnen’), and instruments that ultimately give a right to cash (‘zegels’). In this respect, the CJEU confirms in the Lyko case that if a loyalty point or instrument does not give an independent right to obtain goods or services and can only be used in combination with a new purchase, it will generally be treated as discount instruments, not as a voucher. This policy decree also includes a section on free of charge vouchers. A-G Kokott argued that no business gives anything away ‘free of charge’ and that loyalty points are included in the prices of the products (either in advance or retrospectively). The CJEU does not address this issue, nor any issues already recognized in the Dutch decree and the underlying case law (including Kuwait Petroleum, which the decree expressly cites, or how to determine the VAT‑taxable amount where a complex instrument can be used for cash, goods/services or discounts).
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