Vouchers under Article 19: when the issue of a voucher is a supply, and when tax falls on the redeemed supply

Gift cards, prepaid vouchers and similar instruments raise a timing question. A customer pays when the voucher is issued, but the goods or services are supplied later, when the voucher is accepted as payment. Article 19 of the Implementing Regulations determines whether the issue of the voucher is itself a supply, and therefore where the tax charge sits.

What a voucher is

Article 19(3) provides that a Voucher is an instrument where there is an obligation to accept it as Consideration or part Consideration for a Supply of Goods or services, and where the nature of the Goods or services to be supplied or the identity of the Supplier is indicated on the Voucher or in related documentation.

Two features are essential. There must be an obligation to accept the instrument as consideration, and either the nature of what will be supplied or the identity of the supplier must be indicated on the voucher or in related documentation.

Article 19(4) provides that a face value Voucher is a Voucher which is issued with a specific monetary redemption value indicated on the Voucher or in related documentation.

The issue of a voucher is not a supply

Article 19(1) provides that where a person issues or Supplies a Voucher, this is not considered to be a Supply for the purposes of the Law, subject to the second Paragraph.

The issue or onward sale of a voucher therefore does not, of itself, give rise to tax. The voucher is a means of paying for a later supply. The taxable event is the Supply of Goods or services for which the voucher is accepted as Consideration or part Consideration. Article 19 does not itself fix the tax point of that later supply; it is determined under the ordinary rules, including Article 23 of the Common VAT Agreement.

When the issue of a face value voucher is a supply

Article 19(2) provides that the Supply of a face value Voucher is a Supply of services to the extent that the Consideration provided in respect of the issue or Supply of the Voucher exceeds its monetary face value.

The exception is limited to the excess. Where a face value voucher with a stated redemption value is sold for that value, there is no supply on issue. Where it is sold for more than its face value, the excess consideration is consideration for a Supply of services made at the time of issue or supply of the voucher, and tax falls on that excess at that point.

Applying the rule

The analysis for a business issuing or selling vouchers can be set out in order:

• confirm that the instrument meets the definition in Article 19(3), including the obligation to accept it as consideration and the indication of the goods, services or supplier;
• determine whether it is a face value Voucher under Article 19(4);
• treat the issue or supply of the voucher as outside the scope of tax, except for any consideration received in excess of the face value of a face value Voucher, which is a Supply of services; and
• account for tax on the Supply of Goods or services when it is made against redemption of the voucher, under the ordinary rules on value and tax point.

Instruments which do not meet the definition in Article 19(3) are not Vouchers for this purpose, and their treatment should be considered under the general rules on supply and consideration rather than under Article 19.

Instruments relied on: Common VAT Agreement, Article 23; Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Article 19 (not amended by ZATCA Board Resolution No. (01-06-24) dated 17/05/1446H, published in the Official Gazette, Umm Al-Qura issue 5082, on 18 April 2025). The Arabic text prevails.

← All VAT & tax articles