Giving goods away for free. How about VAT?

Did you ever take goods from your stock to give them away for free as a present or a gift for charity? Or are you planning to do so? Do not forget that this has VAT consequences. If you have deducted VAT, you will have to 'withdraw' the goods. This means that you will have to pay VAT.

Supplying 'for free'?

Goods which are supplied 'for free' are being given away for free, without the recipient  having to pay any consideration.

What to do if you want to supply a good for free?

You have deducted the VAT which you have paid on your capital assets/stock. If you then at a given time supply these goods for free, you do not longer use them for your economic activity. As a consequence, you have no longer right to deduct VAT for these goods. The good will consumed by a regular consumer.

Examples

A computer dealer takes a laptop out of his stock so his son can use it for school.
A bookshop gives some books to a youth association as prices for their tombola.

Currently you have deducted the VAT, while you have no longer right to do so. You should therefore correct this situation. This correction is made through a 'withdrawal'. Such a withdrawal is assimilated with a taxable supply. In other words: it is pretended that you supply the good to yourself (as consumer). On this supply you should pay VAT just like any  other consumer.

Exception (1): free samples and gifts of small value

You do not have to perform a withdrawal (and not pay VAT) if you want to distribute free samples of your product for advertising purposes. The VAT Code foresees explicitly that VAT on free samples is deductible. The sample should be of the same nature as the goods which are produced or sold by your company.
Besides, you can also offer business gifts to your business relations. Also in this case you should make no withdrawal and you can deduct VAT. The value of the gift should however be lower than 50€.

Exception (2): gifts of food surpluses to the Food Bank

Because of the social purpose pursued, an exception is made for producers and dealers which give food surpluses to the Food Bank. In principle this is also a withdrawal which should be subject to taxation. This would however discourage producers/dealers to give the food surpluses away for free. Hence, the VAT authorities will not claim the VAT which normally should be paid.

The following conditions have to be met: (1) goods for human consumption which are subject to the 6% or 12% rate are concerned (so no spirits), (2) which for commercial reasons can no longer be sold in the regular commercial circuit (e.g. goods with a short expiration date or with damaged packing) and (3) which are given to a recognized provincial food bank which will distribute them through charity organizations to the needy.

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