VAT on Unredeemed Purchase Vouchers: A Calcalist Article on Tax Ruling 1108/25

In Tax Ruling 1108/25, the Israel Tax Authority determined that when a purchase voucher expires without being redeemed, the marketing company must issue a tax invoice for the full amount in the name of the voucher purchaser. In an article published in Calcalist in May 2025, Adv. (CPA) Shlomi Vaknin and Adv. Ran Iluz argue that without redemption, no product was sold and no service was rendered, and therefore there is no transaction on which VAT can be imposed.

The marketing company issues and distributes the vouchers and earns a commission that participating businesses pay only upon redemption. According to the authors, in three earlier rulings — from 1988, 2011, and 2014 — the Authority did not impose VAT on the sale of a voucher even when it expired, and the tax liability arose only upon redemption. The new ruling divides the voucher's lifecycle into three stages:

• Sale of the voucher: No taxable transaction arises, because a purchase voucher is a negotiable instrument that the law excludes from the definition of "goods." The company issues a receipt rather than a tax invoice, and the authors agree with this position.

• Redemption of the voucher: Two transactions are created. The business sells the product to the voucher holder, and the marketing company issues a tax invoice to the business for the commission.

• Expiration of the voucher: According to the ruling, the amount retained by the company constitutes consideration for marketing services. This is the novel determination that the authors criticize.

They argue that if the sale of the voucher is not a transaction, it cannot retroactively become one on the day the voucher expires, when no service whatsoever was provided. A tax invoice issued in the name of the voucher purchaser documents a transaction that never occurred, between parties that neither provided nor received any marketing service. The ruling relies on Regulation 5 of the VAT Regulations, which deals with a deposit that was not returned; however, according to the article, the regulation applies only where the amount was received in the context of a taxable transaction, and a purchase voucher is not a deposit. The authors further note that when a voucher can be redeemed at thousands of businesses, it is impossible to determine to whom the marketing service was supposedly rendered.

The authors emphasize that the amount retained by the company is fully subject to income tax as ordinary income. The dispute concerns VAT, which taxes consumption rather than profit.