Informace GFŘ k uplatnění DPH při bezúplatném dodání zboží

Guidelines of the GFD regarding the VAT treatment of free of charge supply of goods

The issue of VAT application in case of free of charge supply of goods was discussed in the previous, now cancelled, guideline (HERE). However, this covered only a narrow range of donations to food banks. The new guideline (HERE) comments on a wide range of cases of donations to, for example, charities, employees or for marketing purposes.

If VAT has been deducted from the goods which were donated and they are not small value gifts used for economic activity or samples, output VAT must always be paid. The problem arises in determining the taxable amount. The guidelines distinguish between two situations.

Purchased goods

The taxable amount is the cost of the goods increased by any modernisation or improvement and lowered by any physical or moral wear and tear. As a simplification, the market price may be used. If the market price is higher than the purchase price, as the taxable amount the price of the goods should be used.

Goods acquired by other means

In contrast to the previous case, as the taxable amount the price of similar goods is used, which may increase over time. Alternatively, if the goods are unique and practically impossible to obtain on the market, the amount of the total cost incurred for the acquisition plus the cost of modernisation or improvement should be used.

A specific case is a product whose market price is fractional (minimum) and marginally close to zero because of a short life span, inadequate packaging, incorrect labelling or other damage. The previous information covered only hard-to-sell food. The GFD now accepts that these factors can also be applied to goods such as cosmetics, pharmaceuticals, animal feed or construction materials (e.g.: paints). The tax base can also be affected by the stage of the sales process or the market situation. On the other hand, for commonly traded goods such as electronics (mobile phones, laptops) or office supplies, the market price should always be used.

The burden of proof is on the taxpayer. It is therefore advisable to obtain sufficiently robust documentation to prove the condition of the donated goods and the arguments leading to ascertaining the taxable amount.

For more information, please contact the authors of the article or the EY client team you are working with.

Authors:

Stanislav Kryl

Pavol Bezek