Discounts, promotions and vouchers: how the VAT works
Written by Ilias Aarrass5 min read · Last reviewed on 
Written by Ilias Aarrass5 min read · Last reviewed on An introductory discount, a December promotion, gift vouchers for the holidays: promotions are part of doing business. VAT mostly just follows what you agree, but a few spots go wrong: discounts stated wrongly on the invoice, giveaways quietly falling under the gift rules, and vouchers where nobody knows when the VAT is actually due. This article lines up the rules.
Discounts: VAT on what is actually paid
The main rule is pleasantly simple: you calculate VAT on the payment you actually ask. Give 20% off a € 1,000 job and you charge 21% VAT on € 800. That covers introductory, volume and early-bird discounts, and prompt-payment discounts too. Do show the discount as a separate invoice line, so it is visible what the VAT was calculated on. Granting a discount afterwards, say an annual bonus for a loyal client, you correct the earlier VAT with a credit note.
Giving away free is not a discount
A promotion like 'second treatment half price' is simply a discount: VAT on the total you receive. But giving something away entirely free, detached from a sale, is a gift for tax purposes. The input VAT exclusion then appears: VAT on purchased giveaways is not deductible once you pass € 227 per recipient per year. Small samples and cheap give-aways stay well below that in practice. The line between promotion and gift: if the free supply ties to a paid sale, it is a discount on that sale; standing alone, it is a gift.
Vouchers: the type decides the VAT moment
For gift and credit vouchers VAT knows two flavours. With a single-purpose voucher the VAT is fixed at issue: one kind of service, one rate, one country. You then owe the VAT immediately on selling the voucher. With a multi-purpose voucher, redeemable for supplies at different rates, VAT falls only on redemption. For a salon selling only its own 9% treatments the gift voucher is single-purpose: VAT at sale. For one also spendable on 21% products it is multi-purpose: VAT once the client spends it.
Worked example: a € 50 gift voucher
- Voucher valid for treatments only (9%)
- VAT at sale: € 4.13
- Voucher valid for treatments and products
- VAT only at redemption
- Client redeems: € 30 treatment, € 20 product
- 9% on € 30, 21% on € 20
- Voucher expires unused (multi-purpose)
- no VAT due
Result: If you sell vouchers, record per type how you treat them and book sold vouchers as amounts received in advance until redemption
Frequently asked questions
Does giving discounts also lower my income tax profit?
Automatically: your revenue is simply the amount after discount. You deduct nothing separately; it is already baked into the lower revenue.
What about referral rewards?
A discount on the referrer's invoice works as an ordinary discount: less revenue, less VAT. Giving a gift or paying cash to a non-client is a cost, with the gift rules attached. Discounts are administratively almost always the simplest form.
Must I remit VAT on vouchers never redeemed?
For a single-purpose voucher you already remitted at sale; that stands. For a multi-purpose voucher no VAT moment arises without redemption, and the amount falls into profit at expiry. So track outstanding vouchers per type.
May I discount below cost?
Yes; VAT simply follows the actual price. Only with sales to related parties, like family or your own company, can the tax authority correct a symbolic price to arm's-length value.
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
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Ilias
