EU: CJEU Advocate General opinion on VAT treatment of points earned under loyalty program (Sweden)

The Court of Justice of the European Union (CJEU) on September 11, 2025, published the nonbinding opinion of its Advocate General (AG) in case C‑436/24 (Lyko), which discusses the value added tax (VAT) treatment of a loyalty program under which customers earn points based on their purchases that can then be redeemed for goods in a subsequent transaction.

The AG concluded that loyalty points must be treated as discount vouchers, rather than as vouchers, under European VAT rules since the points can only be redeemed for a premium item in conjunction with a subsequent purchase and cannot be exchanged independently as consideration for goods or services. The AG further clarified that if the points could be redeemed for a premium item without a further purchase, they would qualify as vouchers, since all the necessary conditions would be met. Notably, the AG asserted that part of the purchase price for products must be allocated to the loyalty points, distinguishing the earlier Kuwait Petroleum judgment, and indicated that points only acquire a determinable value upon redemption, qualifying them as multi-purpose vouchers (MPVs) for VAT purposes.

The AG’s opinion differs from the VAT treatment of loyalty programs in the Netherlands where current policy follows the Kuwait Petroleum judgment and does not allocate part of the purchase price to points awarded “free of charge.” The AG’s approach could result in a higher or lower tax burden depending on the specific design of a loyalty program, the VAT rates applicable to the products and services involved, and whether points are redeemed at other businesses.

Read a September 2025 report prepared by the KPMG member firm in the Netherlands