MultiSport cards and VAT

by Bartosz Trzaska

16 June 2021

 
Sports passes such as a MultiSport card are one of the most popular benefits offered by employers to their employees. Despite their popularity, they still prompt doubts as to their tax treatment, in particular when it comes to VAT.

The Head of the National Revenue Information Service (NRIS) issued on 25 May 2021 an advance tax ruling (file no. 0111-KDIB3-1.4012.112.2021.2 IK) addressing the right to deduct VAT on purchase of sports passes such as MultiSport cards.

The ruling concerns cases when the purchase is financed from three sources:

1. from the employer's working assets;
2. from the Company Social Benefits Fund;
3. from the employee’s own pocket.

MultiSport cards – tax-related doubts

According to Article 86(1) of the VAT Act, the taxable person has the right to deduct input tax from output tax insofar as the goods and services are used in the performance of taxable transactions. When the employer makes the purchase using the funds from the Company Social Benefits Fund, he is not a VAT taxable person but the fund administrator. Therefore, generally, he is not entitled to deduct input tax from the expenses financed from the Company Social Benefits Fund.

Nonetheless, sports passes may be financed from several sources at the same time, e.g. from the Company Social Benefits Fund, from employer’s working assets and from employees own pocket. The aforementioned advance tax ruling concerned such a case exactly. The company started to have doubts as to whether it was entitled to deduct input tax in connection with purchasing sports passes (financed from three sources) and if so, to what extent.

The opinion of the National Revenue Information Service

According to the Head of the National Revenue Information Service:

“If the Applicant (employer), being a VAT-registered taxpayer, purchases MultiSport cards to provide them to his employees, even if against only a partial payment, i.e. for resale, the cards are purchased directly to perform a taxable transaction. Therefore, the Applicant is entitled to fully deduct input VAT shown on the invoices for the purchase of those sports passes, received from a third-party entity.”

On that basis the tax authority has concluded that there are no partially payable transactions in terms of VAT. Each transaction for which payment is collected (even below the costs of purchase) is a transaction against payment. This means that the purchase of MultiSport cards by the company to provide them to the employees, even if against only a partial payment, i.e. for resale, means that the cards are purchased directly to perform a taxable transaction.

That gives the company the right to deduct VAT, despite the purchase being partially financed from the Company Social Benefits Fund.

In the opinion of the National Revenue Information Service, it is the purpose, and not the source of financing of the expense, which is important for determining the right to deduct input tax. If the company purchases sports passes for resale (i.e. to perform a taxable transaction), it has the right to deduct input tax, despite the fact that the purchase is partially financed from the Company Social Benefits Fund, that is using funds which the company administers not as a VAT-registered taxpayer.

Summary

The ruling is favourable to employers. Provision of sports passes remains VAT-neutral for them and they do not have to separate the input tax amounts which correspond to the portion of the expenditure financed from the Company Social Benefits Fund.