Note: This article applies to Awardco Recognition clients only. If your organization uses Awardco Engage for surveys only, you do not utilize budgets, points, or redemptions. Therefore, the financial and invoicing processes outlined below do not apply to your platform.
Awardco is a partner with many global organizations and we understand there are additional tax and finance considerations in the countries we service. We want your recognition programs to run smoothly and for you to have a complete understanding of your financial setup with Awardco. This article outlines the 3 methods with which your organization can be invoiced, details what Awardco does internally to treat redemptions, and answers frequently asked questions regarding international financial treatment.
Note: This article will only discuss transactional tax and not income tax.
Invoicing
Each organization signed on with Awardco is set up with a cash account. Organizations fund that account before using points to purchase products. Like a bank requiring a check to be backed by funds, points on the Awardco platform must be backed with enough funds to fulfill all product redemptions. In terms of invoicing for those funds, the same methods are offered for clients in all countries: Pre-fund, Points Awarded, and Customer Managed Funding.
- Pre-fund: This method permits clients to deposit their entire annual budget into their redemption account, and no invoices are sent out regularly.
- Points Awarded: Clients that agree to be billed on Points Awarded will receive a monthly invoice based on the value of points issued from the previous month. This method does require an initial deposit of 20% of the annual budget.
- Customer Managed Funding: This method allows clients to add funds and points on an as needed basis. When points are added to the Company Account, an invoice is generated and points are added to the company account.
The flowchart below outlines the movement of funds and points through the platform. Funds move into the Cash Account through either an Initial Deposit at launch or through the payment of an invoice. The arrow from Points Awarded to Invoice Generated shows the process of being billed on Points Awarded; an invoice is generated, sent, and then funds are moved into the Cash Account to cover redemption items.
It’s important to note that cash and points are not the same. When orders are placed, the cash in your redemption account is used to pay for these redemptions. Points are the in-platform currency used by the system to distribute purchasing power from your organization, through budgets, to your employees. Points move from the initial upload, to the Company Account, to Budgets, to employee wallets, and are then redeemed. Points are then removed from the platform and moved to the redemptions section of the Funding Summary. When redemption account invoices are paid, the amount paid is reflected in the deposits section of the Funding Summary.
Invoices arrive to your payroll team in the platform base currency, not in separate currencies. If you are billed on pre-funded or customer managed funding, you can expect the invoice to contain what was input as the note when points were added to the Company Account (i.e. Awards for Q3 2022.) If you are billed on Awarded, the invoice note will read as something like: “Redemption Account - Awarded May 2022.” A more detailed invoice with an attached Transactions report can be provided upon request.
International Financial Treatment
All redemptions, no matter the location, will pull the total price of the item in the platform base currency (CAD, GBP, EUR etc.) from the Cash Account. Whatever the cost of the item being redeemed it is what Awardco is stamping and pulling from your organization’s Cash Account.
Value-Added Tax (VAT) on redemptions is detailed in the reports such as the Money Spent and Points Redeemed reports. When VAT details are provided from product vendors, those amounts are reflected in platform source data. There are slight nuances on how VAT is applied to different redemption options:
- Amazon Items: The true cost of the item is pulled from the Cash Account. If the Tax Buffer is applied, only the points necessary to redeem the item (base cost in points + buffer) are redeemed. VAT is only applied to cash redeemed and not points awarded. The price gets updated on reporting but there may be a disparity between points and cash redeemed.
- eGift cards: Because eGift cards are not vouchers or certificates for specific items, VAT is not applied. VAT is assessed at time of gift card redemption/point of sale.
- Virtual Prepaid Cards: Because virtual prepaid cards are not vouchers or certificates for specific items, VAT is not applied. VAT is assessed at time of gift card redemption/point of sale.,
- Hotels: When an employee redeems their points for a hotel, VAT is applied but included in the value of the hotel reservation. The reservation is placed in the employee’s name, and the employee is able to obtain a receipt from the hotel that provides a breakdown of VAT applied.
The graphic below illustrates the movement of cash and how VAT is applied. The client begins their partnership with Awardco by paying for a license fee. This is where Awardco handles VAT. Upon inputting cash into the redemption account, VAT will not be assessed by Awardco. When employees redeem for Amazon, eGift cards, Virtual Prepaid cards, Awardco will work to help fulfill those items, and the client will be responsible for claiming VAT on those items.
Deloitte Integration
Awardco has formed an alliance with Deloitte to help advise clients on tax compliance. With employees across the globe it can be difficult to keep track of all the tax regulatory concerns in each country. Reference for this article to discover which countries this service is available in, and if this is an option is right for your organization.
Frequently Asked Questions
1. How does Awardco handle Value Added Taxes (VAT) in the European Union?
Awardco does not assess, report, file or remit VAT for any business dealings through its US entity. Any tax liability incurred from such inter-country commerce is entirely the responsibility of the VAT-governed entity to self assess and remit to their appropriate tax authorities. Since Awardco does not assess the VAT on invoicing, nor does Awardco address it in the MSA, the recoverability of those costs will lie with the client.
Redemptions are handled by Awardco's payment methods. Awardco, however, holds the client funds in earnest and uses those to pay for the redemptions. There are VAT taxes assessed to those items and those are recoverable by the client, should they so wish, by downloading the reports hosted on the Awardco platform that detail those tax breakouts. To which tax authority against which they have to claim recovery is not captured directly on those reports, but can likely be inferred by the employee's country of residence as long as that data is provided to the system.
Awardco cannot control how VAT is assessed from vendors. Vendors that provide Awardco redemption options follow their own obligations. Because of this, Awardco is not involved in that taxation chain, as the transaction is between the vendor and the client.
2. Does Awardco claim my company’s awards or redemptions on their business taxes?
Awardco does not claim client awards or redemptions on company taxes.
3. Does the tax buffer apply to Hotels & Tickets or eGift Cards?
No; the tax buffer only applies to Amazon items.
4. Once launched, where can I go to get current documents to share with my finance team for payroll and my company's taxes?
Our Reporting feature on Admin settings allows for access to reports that breakdown data relating to employee awards and redemptions. Admins of Awardco are able to access reports, apply data and time filters, and download spreadsheets to deliver exactly what stakeholders are looking for. Many payroll teams find the Recognition Details, Points Redeemed, and Redemption FIFO reports to be helpful.
If you have any questions, please contact Awardco Admin Support.