How to correctly process gift vouchers in your administration?

Why does one gift voucher have VAT and the other not?

The difference in revenue treatment of gift vouchers between businesses depends on the type of business and the various VAT rates that apply. There are essentially two types of gift vouchers when a company issues vouchers that can only be spent at the respective establishment:

• Gift vouchers from businesses with one VAT rate
  Companies that use only one VAT rate – for example, clothing stores – must book gift vouchers directly as revenue upon sale. This is because it is already clear at the time of sale that the voucher will be used for products with a fixed VAT rate, for example, 21%.
  
• Gift vouchers from businesses with multiple VAT rates
  Companies that use different VAT rates – for example, restaurants for food (9%) and alcoholic beverages (21%) – should not book gift vouchers as revenue upon sale. Upon sale, the gift voucher is seen as a credit or future payment method, and the money is booked to an interim account. When the voucher is redeemed, the payment with the gift voucher is deducted from the interim account.

Now that we have explained the difference between the types of gift vouchers, let’s continue with the specific administrative processing at the sale and redemption of gift vouchers.

Sale of gift vouchers: When is it revenue?

Gift voucher booked as revenue directly (including VAT)
When a gift voucher must be considered revenue immediately, you should process it including VAT upon sale. This applies to businesses with a single VAT rate, such as a clothing store.

Example: Sale amount of gift voucher: €50.00

VAT (21%): €8.68
Net revenue: €41.32

The booking would appear as follows:
Accounts Receivable/Cash €50.00
Revenue €41.32
VAT Payable €8.68

Booking gift vouchers to an interim account (no VAT applicable)
If the gift voucher should not be considered revenue immediately, as in businesses with multiple VAT rates, the money from the sale is booked to an interim account. The gift voucher is considered a means of payment upon redemption and deducted from the interim account.

Example: Sale amount of gift voucher: €50.00

The booking would appear as follows:
Accounts Receivable/Cash €50.00
To gift voucher interim account €50.00

Redemption of gift vouchers

Administrative processing of gift vouchers booked as revenue
When redeeming gift vouchers that have already been booked as revenue, such as in businesses with a single VAT rate, no VAT needs to be remitted on the portion paid with the gift voucher. This is because VAT was already accounted for at the time of sale. Only VAT on the difference needs to be remitted.

Example:

Gift voucher value: €50.00
Total purchase amount: €80.00
Additional payment: €30.00
VAT (21%) on additional payment: €5.20
Net revenue: €24.80

The booking would appear as follows:
From interim account: €50.00
Accounts Receivable/Cash: €30.00
Revenue: €24.80
VAT payable: €5.20

Administrative processing of gift vouchers booked to the interim account
When redeeming gift vouchers that were not booked as revenue at the time of sale but were recorded as future payment methods on the interim account, such as in businesses with multiple VAT rates, VAT must be remitted on the entire purchase amount. This is because VAT was not remitted on the value of the gift voucher at the time of sale, and the amount was only registered as a future payment method.

Example:

Gift voucher value: €50.00
Total purchase amount: €80.00
Additional payment: €30.00 VAT (21%)
on total purchase amount: €13.88
Net revenue: €66.12

The booking would appear as follows:
From interim account: €50.00
Accounts Receivable/Cash: €30.00
Revenue: €66.12
VAT payable: €13.88

Unredeemed Gift Vouchers

Gift vouchers that are not redeemed within the validity period (which can vary between 2 and 5 years) do not have to be accepted anymore, although it is allowed. The entrepreneur can decide this themselves and with the appropriate software package for gift vouchers, they can extend the validity.

Expired gift vouchers booked as revenue
Expired gift vouchers that have already been booked as revenue at the time of sale have already been administratively processed and do not require any further financial action. Only in cases where this money was reserved, it can now be released.

Expired gift vouchers booked to the interim account
For expired gift vouchers that were booked to the interim account at the time of sale and on which no VAT has been remitted, this still needs to be done. The amount excluding VAT is now booked as revenue.

Example:

In May, a total of €300.00 in gift vouchers expires, which have passed their expiration date. You can see this in the transaction overview of your gift voucher system.

The booking would appear as follows:

From interim account: €300.00
Revenue: €248.00
VAT payable (21%): €52.00

Conclusion

Processing gift vouchers in your administration requires carefulness and attention to detail. By following the right steps both at the sale and redemption, and by considering unredeemed vouchers, you ensure that your records are accurate and that you comply with VAT regulations. We hope that this blog helps you to efficiently and correctly handle gift vouchers in your administration. If you have any questions or want to learn more about specific situations, please feel free to contact us!