IN 118: Value-Added Tax Consequences of Points-Based Loyalty Programmes

Loyalty programmes differ from each other, evolve and change because of continuous changes in market conditions, competition etc.

For this reason, the general VAT principles applicable to loyalty programmes as contained in this interpretation note (“IN”) must be analysed and subsequently applied to each transaction in a loyalty programme in accordance with that specific loyalty programme’s characteristics or nature.

This IN concentrates on loyalty programmes that regard loyalty points as a form of payment or part-payment for goods or services.

Should any of the agreements specifically contradict this, for instance where the relevant agreements evidence loyalty points to be regarded as a discount on future purchases, this IN does not apply to the specific circumstances.

All examples contained in this IN are based on the assumption that the relevant parties of a loyalty programme are all vendors.

The policies and further applications associated with vouchers, tokens or stamps are not discussed in detail in this IN.

The IN addresses, inter alia, the VAT implications of:

1. The awarding of loyalty points
2. The sale of loyalty points
3. The payment of points fee
4. The transfer of loyalty points between members
5. The redemption of a loyalty point
6. Conversion of loyalty points
7. Expiration of loyalty points

Find a copy of IN 118 here.

12/11/2021