Application of VAT to gratuitous supply_donation of goods

Do you want to donate food, drugs, clothing, household goods, furniture or even a machine, car or property and have you claimed a VAT deduction on the purchase of these items?

If you donate goods outside the EU through non-profits, you don't have to worry about paying any output VAT. This is due to a special exemption in Article 68(15) of the VAT Act: "The supply of goods to humanitarian and charitable organisations which, in the course of their humanitarian, charitable or educational activities outside the European Union, dispatch or transport them to a third country is exempt from tax with a right to deduct."

In other cases, however, you will not avoid paying output VAT.

At the beginning of August, the tax administration issued new INFORMATION on the application of VAT to gratuitous supply of goods.

According to the VAT Act, if the taxpayer has legitimately claimed a tax deduction on the acquisition of goods, they are obliged to pay output tax on their gratuitous supply.

The price in the case of purchased goods means the current residual value of the goods, which corresponds to the purchase price of the goods, plus, where applicable, the cost of converting, refurbishing or modernising the goods in question, less the value of the physical and moral wear and tear of the goods at the date of their gratuitous delivery. As a certain simplification, it is possible to base this on the fair (market) value of the goods at the date of their gratuitous supply, taking into account their condition at the time of the gratuitous supply.

For goods acquired otherwise, the price of similar goods on the date of the taxable supply (i.e. on the date of the gratuitous supply) is usually used.

The information acknowledges that the taxable amount may be close to zero in the case of goods that are no longer especially marketable or completely unsaleable (food or drug products close to their expiry date or best before date or with inadequate packaging, flowers, feed, paints, etc.).

However, for commonly traded goods (laptops, mobile phones, office supplies, cars, etc.) it will almost always be the market price.

In order to prove the donation of goods, it may be advisable to secure evidence which shows the object, extent and time of the donation. To prove the valuation of the goods for the purposes of determining the tax base, it is also advisable to document the condition of the donated goods (damaged packaging, approaching expiry date, etc.).

The information also contains a warning that in the case of the purchase of goods with the aim of their gratuitous delivery, the right to deduct tax under the VAT Act cannot be exercised and the subsequent donation of these goods is not subject to tax (except in the situation referred to in Section 68(15) of the VAT Act).