- A BMF letter has been agreed upon to provide more legal certainty for companies regarding the VAT treatment of donations in kind.
- Donations in kind are subject to VAT as “uncompensated value transfer” if the donated item or its components were eligible for input tax deduction at the time of acquisition.
- The VAT taxation of donations in kind compensates for the input tax deduction and prevents untaxed final consumption, which would be incompatible with the EU VAT directive.
- The VAT base for donations in kind is determined based on the (fictional) purchase price at the time of the donation.
- The determination of the VAT base takes into account any value developments or significant material or packaging defects that may affect the marketability of the donated products.
- The fictional purchase price should be determined based on a reasonable value, and not simply set at 1 euro.
- It may be necessary to rely on experience or estimate the value when determining the fictional purchase price.
- The reasons why companies choose to dispose of goods rather than donate or sell them at a low price are diverse and not primarily related to VAT.
- The VAT treatment of donations in kind aims to provide a fair and consistent approach for companies.
Source: bundesfinanzministerium.de
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
