- 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.
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.