Weekly VAT News

Lyko Operations AB: VAT treatment of loyalty schemes – CJEU AGO

Swedish company Lyko Operations AB sold hair care and beauty products in physical shops and online. Lyko was developing a customer loyalty programme whereby customers could receive points for purchases, which they could redeem for goods from a ‘points shop’, but only in connection with a subsequent purchase. Lyko applied for a ruling from the Swedish Revenue Law Commission to clarify how the programme should be treated for VAT purposes. This subsequently resulted in a referral to the Court of Justice of the European Union asking whether the points awarded in Lyko’s programme were vouchers (under Article 30a of the EU Principal VAT Directive (PVD)), and, if so, how the taxable amount would be determined upon redemption. Advocate General Kokott has opined that the issue of the points did not constitute a voucher. Under the PVD, the definition of voucher requires two conditions: first, the goods/services or the potential supplier must be identifiable from the voucher or related documentation; and second, there must be an obligation to accept the voucher as consideration for a supply. While Lyko’s programme would satisfy the first condition, it would not meet the second. The points could only be redeemed in conjunction with a subsequent purchase, and therefore functioned as an effective discount. There was no obligation on Lyko to supply goods independent of a subsequent purchase. The AG also dismissed arguments that the points represented gifts or would be provided free of charge, on the basis that the value of the points is included in the price of the initial purchase. In light of the AG’s finding, it was not necessary to answer the second question, regarding the calculation of the taxable amount. It remains to be seen whether the CJEU will follow the AG’s opinion. (Contact: Andrew Roberts)  

‘Žaidimų valiuta’ MB– VAT treatment of in-game currency – CJEU AGO

‘Žaidimų valiuta’ MB (Zv), based in Lithuania, purchased ‘in-game Gold’ from players of an online game and re-sold it to other players. Customers were individuals looking to purchase in-game Gold. In-game Gold can be used to, for example, pay for player status upgrades, pay for access to in-game events, or purchase gold and items from other games. The Lithuanian tax authorities noted that Zv derived significant income from purchasing and re-selling in-game Gold, and considered that Zv should be registered and accounting for VAT. The issue was referred to the Court of Justice of the European Union. The first question referred to the CJEU was whether the supply of in-game Gold was VAT exempt as a financial transaction. Advocate General Kokott has concluded that the financial services exemption did not apply to in-game Gold, as it was not legal tender or used solely as a contractual means of payment, but only a means within the game. The second question was whether, if exemption did not apply, the taxable value was the total consideration received for the sale of the in-game Gold, or the difference between purchase and selling prices. However, the AG also considered whether in-game Gold was a voucher for VAT purposes, as Zv had argued, and concluded that it was not. With respect to the taxable value, the AG considered whether the second-hand margin scheme could be extended to apply to services, such as in-game Gold, traded on a secondary market. Under the second-hand margin scheme, traders purchasing certain second-hand goods only pay VAT on their profit margin (preventing double taxation). The AG recognised that in-game Gold was a service, and not a good, but that, considering the history and objectives of the second-hand margin scheme, there was an argument for extending the scheme to include services, this being an issue for the referring body to determine with respect to in-game Gold. It remains to be seen whether the CJEU will follow the AG’s opinion. (Contact: Chris Hawkins)

Corporate Criminal Offences statistics – HMRC update

HMRC have updated their statistics on investigations of Corporate Criminal Offences (CCO) for the failure to prevent the facilitation of tax evasion. As at 30 June 2025, HMRC had secured one charging decision, with an additional 11 live CCO investigations. A further 27 identified cases were under review as to whether they should proceed to an investigation. The cases identified span 13 business sectors. To date, HMRC have reviewed and rejected an additional 121 cases. However HMRC note that some of these previous investigations have led to satisfactory explanations that have caused CCO investigations to be dropped, but have instead led to other potential tax and regulatory offences being pursued. (Contact: Adam Routledge)

CJEU VAT case calendar

On 25 September, there will be an Advocate General opinion in joined cases on the application of the reduced VAT rate for accommodation to supplies of services such as parking spaces, breakfast, and other ancillary services, J-GmbH, Blapp and D GmbH. There will also be an Advocate General opinion in Oblastni nemocnice Kolin on VAT deductibility of hospital expenditure.

Dbriefs webcast

On Wednesday 24 September at 12.00, there will be a webcast on Deloitte’s Tax Transformation Trends 2025 report. The report, based on a survey of over 1,000 senior tax and finance leaders, reveals the key challenges facing tax departments. The webcast will discuss how tax professionals are reshaping operating models in response to trends in data management, cost pressures, AI adoption, and outsourcing.