Charity without VAT ... but under certain conditions

What do you do with remaining stock? Sell at bargain prices, destroy, give away? For some time, it is possible to give away food without VAT consequences. But for other goods this is only possible as of mid-May. And even then, it is not possible for all goods.

Why VAT?

Yes .. why do you have to pay VAT on charity? If your company buys goods (in your own country) you pay VAT. This is deducted in the VAT return. But what do you do with these goods? If you sell them, you receive VAT from the buyer which you pay to the Treasury, again through the VAT return. When the goods are destroyed, the story ends there. But what if you 'consume' these goods yourself? Certainly, you do not have to pay for the goods themselves, but for VAT purposes (we are not talking about income tax) you should act as if you buy the goods from yourself, charge VAT and report it in the VAT return.

Until a couple of years ago, the tax authorities considered 'charity' the same as 'consume yourself' and therefore the company was to pay VAT on this charity. Merchants therefore were better off destroying goods on their expiry date than to give them away. With all the food squandering going around, this is too crazy for words and as from 2013 giving away food for human consumption for charity was waived from VAT.

Non-foods

As of mid-May you can also donate non-foods without VAT. However, the exemption has some limitations.

The exemption only applies to 'vital' non-foods. The legislator defines this as 'goods which can increase the quality of life of people living in poverty', and which are 'necessary in the daily life of people, so they can lead a decent life'.

We think in first instance of hygiene products (soap, shampoo and tooth brushes), basic medicines for the home pharmacy, products for babies and small children (diapers) and school and office supplies (from pencils to school bags).

The goods cannot enter again in the economic circuit (in other words cannot be sold anymore). Therefore 'sustainable' goods are excluded. The legislator mentions goods like cars, lawnmowers etc. But basic goods for domestic comfort (beds and linen) and kitchen utensils (pots and pans) are VAT exempt when given away for free for charity.

Entrepreneurs can as from now show their warm hearts without being punished. Goods (whether or not foods) which are (almost) unsaleable can be given away for charity. Luxury goods cannot be given away without VAT since the risk of fraud is too high.

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What do you do with remaining stock? Sell at bargain prices, destroy, give away? For some time, it is possible to give away food without VAT consequences. But for other goods this is only possible as of mid-May. And even then, it is not possible for all goods.