New special rules for in-kind donations
In view of the exceptional situation for retailers as a result of the coronavirus pandemic, which has meant that typical sales after in-store personal consultations were not allowed any more, special rules for in-kind donations have been introduced for the period from 1.3.2020 to 31.12.2021. Now, two Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) circulars from 18.3.2021 (references: III C 2 – S 7109/19/10002 :001, document no. 2021/0251308 and 2021/0251343) have set out the suspension of VAT on in-kind donations, or its reduction to zero in the assessment base, for retailers that have suffered a direct adverse economic impact, which is not insignificant, as a result of the coronavirus crisis. The prerequisite for this is that, during the above-mentioned period, the donation accrues or has accrued to a tax-privileged organisation.
Extending a common practice
The BMF circular has extended a common practice for in-kind donations of food. In the case of food and non-food items with a best-before date (e.g., drugstore products or pet food) it should be presumed that the goods are objectively worthless if their best-before dates are about to expire. Consequently, the VAT assessment base, which is determined by the notional purchase price when the donation was made (replacement costs), is reduced to €0.
Coronavirus-induced equitable measures
For retailers with goods that are no longer marketable, or only to a very limited extent, (e.g., seasonal goods) the rules are considered to be equitable measures as a consequence of the coronavirus pandemic. The tax on ceded assets will be waived in the case of donated goods that still have an objective value in €. However, the assessment base will not be reduced to €0 in this way. Instead, a tax claim will still arise and will have to be determined (and actually also has to be reported). If the conditions in the BMF circular have been met then the fiscal authority will, for equitable reasons, waive the claim arising from the tax liability.