On 24 July 2024 the Supreme Administrative Court (SAC) gave a break-through verdict on whether a delivery of extra goods to a purchaser by way of a loyalty bonus may be treated as an after-sale rebate (case number I FSK 1470/20).
The matter involved a company offering its customers a loyalty bonus whereby it delivers extra goods to customers that exceed a certain sales target. According to the company, such deliveries should be treated as an after-sale rebate that reduces the unit price (more goods are received for the same price). Accordingly, the company’s argument ran, the company is entitled to adjust (reduce) the taxable amount of and the VAT due on such sales.
The tax authority did not share the company’s view. The authority held that a delivery of extra goods to a customer does not reduce the price but rather constitutes a supply of goods otherwise than for a consideration and as such should be subject to VAT. Its argument was that a delivery of extra goods to a customer may constitute a rebate only if it is related to a specific supply, i.e. it happens under the same legal relationship. But if such a delivery cannot be related to a specific business transaction, then it is a delivery of goods for no consideration which is separate from the sale itself.
The matter came up for judicial review to the Provincial Administrative Court in Kraków (PAC), which went along with the company’s argument (case number I SA/Kr 870/19). PAC held that a bonus involving a delivery of extra goods is related to specific supplies made over a specific time. Taking a bird’s eye view of the transaction, the court concluded that the purchaser receives more goods for the amount it originally paid. In effect, the unit price of the goods changes, which can be treated as a summary rebate. The matter reached the top court which upheld PAC’s judgment.
SAC’s decision will certainly set a direction for tax authorities to follow in their treatment of deliveries of extra goods as an after-sale rebate. However, businesses offering such loyalty bonuses should conduct a case-by-case analysis if their specific delivery meets the requirements allowing it to be considered an after-sale bonus that entitles them to reduce the taxable amount for VAT purposes.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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