Reward cards represent, as research show, one of the most popular form of rewards granted within loyalty and sales-supporting programs. These rewards are attractive both to the participants and the organisers. Why?
Personalised, immediately available, flexible, do not require storing, always within a reach for the organiser. These are the features characteristic of the prepaid reward cards. The advantages of the cards are countless, both from the organisers and participants’ perspective. However, frequently, prior to deciding to launch a loyalty program or at a further stage – when selecting the reward – questions arise in the minds of the organisers as to the profitability of investing in such activities. However, also in this case, reward cards appear to be a very appealing offer in view of the savings they generate.
Promotional items distributed free-of-charge during various marketing campaigns are subject to VAT. Pursuant to the Act of 11th March 2004 on VAT, the tax applies generally to transactions relating to goods and services. However, both electronic and paper reward vouchers represent neither a provision of a service nor goods, thus, they are not subject to this tax. It means that using reward cards may bring you savings in terms of promotional campaign budget at the level of 23%.
VAT is not the only financial burden that you have to take into account. It is also worth keeping in mind the income tax applied to the winners of loyalty programs, such as, inter alia, competitions and bonus sales, which must be collected from them by the organiser. If you do not want to discourage the participants, it is worth remembering about the rates which are exempted from the tax and offer such rewards which will be also beneficial to the participants in this regard.
Pursuant to Art. 21(1)(6a)(68) and (68a) of the Act of 26th July 1991 on personal income tax (consolidated text in Journal of Laws of 2018, item 200, as amended) – the PIT Act – a natural person is exempt from income tax if he/she receives free-of-charge such items as, inter alia:
- benefits transferred within the framework of a campaign or advertisement – one-time up to PLN 200 – while such exemption does not apply to the benefits transferred to, inter alia, own employees or contractors (item 68a);
- rewards connected with the reward sales of goods or services – one-time up to PLN 2000 – provided that the reward does not apply to the business run by a natural person (item 68);
- rewards won in a given field of knowledge, culture, arts, journalism and sports competition – one-time up to PLN 2000 (item 68);
- rewards won in the competition held and broadcasted (announced) via mass media (press, radio and television) – one-time up to PLN 2000 (item 68);
- rewards won at the promotional lottery – one-time up to PLN 2280 – while the amount, obtained based on one lottery ticket or any other proof evidencing the participation in the lottery, is considered to be the one-time value of the rewards won (item 6a).
In the above-mentioned cases, the benefit provider (organiser) does not have the obligation to collect the tax and submit the PIT-8C or PIT-8AR declaration.