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Free Burgers and Loyalty Points: A Taxing Journey Through Sales Promotions

Updated: Nov 10, 2023

By Richard "Rich" Fox, eFinance Guru and Burger Enthusiast



Hey there, Financial Mavericks!


Ever been wooed by a "buy 5 burgers, get the 6th free" offer? Or perhaps, "fill up your tank and nab a donut on the house"? Me too, friend, me too.


In today's competitive market, loyalty programs are a popular way to reward your customers and encourage repeat business. But how exactly should these transactions be reflected in your business accounting?


When you throw freebies around like confetti at a parade, you're making customers smile and your accountant frown. Here's a spicy question:


How should the company record this transaction? Should we also reflect turnover and pay VAT for the free product, considering the voucher as a means of payment? Or can we count the free product as a discount/compensation and not reflect it as turnover?


It's a valid concern, and here's how to tackle it:

Hand holding black chopsticks with a red cherry on a black background

Rich's Tasty Tips:


Based on the description, customers get a free item after purchasing a certain quantity of goods. In this scenario, the seller should declare the previously paid purchases as taxable turnover.


When purchasing specific goods, customers earn the right to receive a free item offered by the seller. If the customer utilizes this right, the free product's handing over should be considered as part of the previous loyalty program purchases for which VAT has already been paid.


According to the VAT Act § 12 section 8, the taxable value of goods or services can be reduced by the amount of discount applied for commercial purposes during the sale or provision of the service. If the sales campaign is conducted in this way, the discount can also be applied later.


In the previously described case, you don't have to declare the free product on the VAT declaration, as such free transfer of goods can be treated as a price concession or discount as part of a sales campaign conducted for commercial purposes.



Wrapping Up:


buttons Loyalty, Customer, Togetherness, Trust, Business

Loyalty programs and free goods are like the secret spices of the business world, enhancing customer relationships and adding a special flavour to your brand. But they also need careful measuring in your financial kitchen.


Hungry for more financial insights and a community that shares your passion for business? Join the eFinance community today! We've got the tools, tips, and know-how to help you create a business that's as satisfying as your favourite dish.


Stay curious, stay hungry, and keep those business dreams sizzling!


P.S. Remember, a professional accountant is like a seasoned chef; they know the local ingredients. Don't hesitate to consult one for the perfect blend of advice.

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