Date: 29 May 2017
Issuing Authority: FPS Finance, General Administration of Taxation – Value Added Tax
1. Introduction
This circular addresses the right to deduct VAT and the necessary adjustments related to the free distribution of various items, including samples, commercial gifts, promotional items, occasional gifts to staff, and donations to disaster victims or from food surpluses. The document aims to clarify and harmonize the rules surrounding these transactions.
2. Free Distribution of Samples
- When businesses distribute samples for promotional purposes, the VAT on these samples is deductible if they are recognized as operating expenses for income tax purposes.
- Samples must be similar to the goods the company sells but do not need special packaging or labeling.
- Taxpayers must provide evidence (e.g., signed receipts) that the samples were distributed without triggering VAT liabilities.
- Notably, no VAT deduction is allowed for free samples of alcoholic spirits.
3. Commercial Gifts of Small Value
- Items given as gifts in a professional context may qualify for VAT deduction if they meet specific criteria:
- The gift must not exceed a value of €50 (excluding VAT).
- It should not fall under specific categories outlined in Article 45 of the VAT Code.
- Each professional relationship is limited to one deductible gift per calendar year.
- Single-use vouchers for goods or services can also qualify as gifts of small value.
4. Promotional Items
- VAT on promotional items is deductible if they:
- Are intended for widespread distribution.
- Have low value for recipients.
- Clearly display the donating company’s name.
- Consumer goods (like wine or chocolate) that do not prominently feature the company’s branding are considered gifts of small value.
5. Occasional Gifts for Staff or Their Children
- Gifts to staff or their children are generally considered private benefits and are not deductible if the recipients are predetermined.
- However, if the distribution is uncertain or collective (e.g., to all staff or children meeting a certain age), the VAT can be deducted, provided the gifts are under €50 in value.
- Like commercial gifts, only one occasional gift per beneficiary is eligible for VAT deduction annually.
6. Goods Donated to Victims of a Disaster
- Donations of goods to disaster victims do not necessitate VAT deduction adjustments, regardless of the goods’ value. This provision aims to facilitate aid without tax complications.
7. Donation of Surplus Food
- Guidelines on donating food surpluses reference previous decisions concerning donations to approved food banks and local authorities, ensuring that these donations are also exempt from VAT adjustments.
Conclusion
Circular 2017/C/32 clarifies the VAT treatment of various forms of free goods distribution, detailing the conditions under which VAT can be deducted for samples, commercial gifts, promotional items, and donations. The circular emphasizes a structured approach to ensure compliance while promoting charitable actions and business practices without undue tax burdens.
