Portugal: Introductory gift does not constitute separate VAT-taxed (deemed) supply of goods (CJEU judgment)

A CJEU judgment concerning whether an introductory gift constitutes a separate (deemed) supply of goods subject to VAT

Introductory gift does not constitute separate VAT-taxed (deemed) supply of goods

The Court of Justice of the European Union (CJEU) on 5 October 2023 held that an introductory gift for taking out a magazine subscription did not constitute a separate (deemed) supply of goods subject to value added tax (VAT).

The case is: Deco Proteste – Editores (C-505/22)


A publisher established in Portugal runs promotional campaigns whereby new subscribers who sign up for a subscription receive a tablet or smartphone (with a value of less than €50) as an introductory gift. The publisher sends the introductory gift to the new subscribers after the first monthly subscription payment and does not charge the subscribers anything extra for the gift. Even if the subscriber cancels the subscription after the first payment, they can still keep the introductory gift.

The publisher had only paid VAT at the reduced rate on the supply of the subscription and had not paid VAT at the ordinary rate on the supply of the introductory gift. The Portuguese tax authority argued that the introductory gift constituted a separate deemed VAT-taxed supply and imposed hefty supplementary VAT assessments.

CJEU judgment

The CJEU applied its established case law regarding when multiple transactions together constitute one supply for VAT purposes and found that the introductory gift is “an integral part of the commercial strategy” of the publisher, i.e., that the publisher has successfully used the gifts for the sole purpose of selling more subscriptions and this is based on rational financial calculations.

According to the CJEU, in these circumstances the provision of the introductory gift does not have a distinct purpose from the perspective of the customer. It is an ancillary service to the principal service of providing magazine subscriptions. There is thus no supply made free of charge and the publisher does not have to pay any VAT on the provision of the introductory gift, only on the subscription.

Read an October 2023 report prepared by the KPMG member firm in the Netherlands


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