Advocaten / Avocats / Lawyers

Tuesday, 28 April 2020

In what situations and under what conditions can I donate goods for charity, without negative VAT consequences?

:: UPDATE - 01/09/2020 :: 

When VAT payers donate goods, this can have adverse tax consequences. As far as VAT is concerned, this may mean that VAT has to be paid on a "fictitious" supply (withdrawal) or on an alleged sale of these goods (legal presumption). Over the years, the position of the VAT legislator/administration has eased somewhat in this respect.

Under the generally applicable rules, subsequent donations/gifts should not have a harmful VAT impact:

  • Goods donated in exceptional circumstances to victims of a disaster. At present, however, we have no indication that the VAT administration will regard the Covid-19 crisis as a disaster, which makes this path anything but certain.
  • The donation of food/drinks (excluding spirits) of which the expiry date is very close or of which the usual packaging is damaged to needy persons, the food banks registered with the Belgian federation of food banks, the local or supra-local authorities (such as CPAS and municipalities) and the local charities recognised by the aforementioned local or supra-local authorities.
  • The donation to recognised charities or distribution platforms of essential non-food products including essential hygiene products such as soap, shampoo, toothpaste and toothbrushes; beauty and basic care products such as cleaning creams, razor blades and shaving foam; basic medicines for the home pharmacy such as aspirins, bandages and disinfectants; household products such as floor cleaners, laundry products and garbage bags; products for babies and small children such as diapers, appropriate soap and shampoo; school and office supplies such as ballpoint pens, pencils and book bags; in addition, toilet paper and disposable towels; games and toys; clothing and shoes; kitchen utensils such as cooking pots and pans and basic household utensils such as household linen.

If your company is considering a donation, it should be carefully considered whether you can qualify under one of the aforementioned categories in order to avoid negative VAT consequences. 

Furthermore, it is important that the VAT taxable donor who has enjoyed the right of deduction for the above-mentioned donated goods keeps the necessary documentation. The current regulations provide for different possibilities to do this per transaction (per donation a document, collection document, specific entries, etc.). It is important to pay sufficient attention to this in order to avoid discussions during future audits.

Specifically in the context of the COVID-19 crisis, it was decided not to require a VAT correction for the donation of specific goods done by a VAT taxable donor to specific institutions.  

More into detail, it concerns the donation of:

  • Medical devices and their accessories such as devices, tests, software, etc. used for diagnostic and / or therapeutic purposes. Goods that were not originally intended as a medical device by the manufacturer may still be assimilated to this (from 1 March 2020 up to and including 1 September 2020);
  • Protective equipment for caregivers and patients such as mouth masks, handles, protective clothing, etc. (from 1 March 2020 up to and including 1 September 2020);
  • Computers (desktops, laptops and tablets) by VAT-taxable companies to schools located in Belgium, regardless of whether these schools perform VAT taxable or VAT exempt supplies (cf. VAT exemption for educational services) (from 1 March 2020 up to and including 31 December 2020).

In this respect, it is important to note that not only manufacturers or distributors of the above-mentioned goods are envisaged by this temporary measure. This measure also apply to VAT taxable entities that purchased these goods to use them for their economic activities. 

With respect to the donation of computers, it is also important to note that this measure also applies even if a computer is purchased for the sole purpose of donating it in the context of the fight against the Coronavirus.

Donations that are done under this temporary measure should also be made to the following beneficiaries:

  • Institutions that qualify under the VAT exemption for medical services, incl. hospital groups, - associations, and – networks;
  • Government agencies or other public sector bodies that will be responsible for the further distribution of these goods;
  • Institutions with the aim of care for the elderly;
  • Institutions with the aim of childcare;
  • Institutions with the aim of care for the disabled;
  • Institutions providing school and university education;
  • Humanitarian aid organizations;µInstitutions that are recognized by the General Administration of Customs and Excise and that, pursuant to European Decision (EU) 2020/491 of 03.04.2020, can import relief goods into Belgian territory under the temporary exemption from VAT and import duties.

Naturally, the taxable donor who has been entitled to a VAT deduction for the donated goods is required to document these donations. The corona-measure does not change anything with respect to this obligation.

If you have any questions on this subject, please contact the authors of this article or via covid19@tiberghien.com.

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