Free‑of‑charge cross‑border EU supplies are not VAT‑exempt

Summary

• The German Ministry of Finance (BMF) confirms that free‑of‑charge cross‑border supplies of goods do not qualify as VAT‑exempt intra‑Community supplies.
• The VAT exemption for intra‑Community supplies requires a taxable intra‑Community acquisition in the Member State of destination, which in turn presupposes consideration.
• The German VAT Application Decree (UStAE) is amended accordingly, and the new rules apply to all open cases.

Article

On 31 March 2026, the German Ministry of Finance (Bundesministerium der Finanzen – BMF) issued a clarification on the VAT treatment of free‑of‑charge cross‑border supplies of goods within the EU. The guidance explicitly excludes such transactions from the VAT exemption for intra‑Community supplies.

Legal reasoning behind the clarification

Under German VAT law, the VAT exemption for an intra‑Community supply pursuant to § 4 no. 1(b) UStG in conjunction with § 6a UStG is subject, inter alia, to the condition that the corresponding acquisition in another Member State is subject to VAT. This reflects Article 2(1)(b) of the EU VAT Directive, which links the exemption at dispatch to the taxation of the intra‑Community acquisition at destination.

The BMF emphasizes that, although § 3(1b) UStG treats certain free‑of‑charge supplies (unentgeltliche Wertabgaben) as equivalent to supplies for consideration for domestic VAT purposes, this legal fiction does not remove the requirement of consideration for the purposes of an intra‑Community acquisition under § 1a(1)(3)(a) UStG.

As a result, where goods are supplied free of charge to a recipient in another EU Member State, no taxable intra‑Community acquisition can arise in the Member State of destination due to the absence of consideration. Consequently, the corresponding supply cannot benefit from the VAT exemption for intra‑Community supplies.

Amendments to the VAT Application Decree (UStAE)

To reflect this interpretation, the BMF amends the Umsatzsteuer‑Anwendungserlass (UStAE) as follows:

• Section 3.2(2) sentence 1 UStAE is revised to explicitly exclude the VAT exemptions for both export supplies and intra‑Community supplies in the case of free‑of‑charge value supplies within the meaning of § 3(1b) UStG.
• Section 6a.1(16) UStAE is supplemented with a new sentence clarifying that, for free‑of‑charge supplies, the lack of consideration precludes acquisition taxation in the other Member State, thereby excluding the VAT exemption for intra‑Community supplies as a matter of principle.

Scope and application

The BMF confirms that the principles set out in this letter apply to all open cases. The guidance reinforces the systematic link between exemption at dispatch and taxation at destination and closes a potential area of misinterpretation in practice, particularly for transactions involving samples, promotional goods, or other free‑of‑charge supplies to third parties across EU borders.

The letter will be published in the Bundessteuerblatt Part I, ensuring formal administrative applicability.