Consistent Inconsistency: Charitable Donations and EU VAT – Review and Analysis

Abstract

The VAT Directive does not provide any specific regulation on charitable donations. Most of the EU Member States try to somehow close the gap, either by adapting already existing provisions (zero-value approach or extended notion of commercial gifts of small value) or by enacting preferences on their own initiative (non-taxation or exemption of such donations). This principally concerns unsellable goods, i.e. goods that are still suitable for use but can no longer be placed on the market. The VAT Committee suggests the zero-value approach, but this approach is controversial and uncertain. Therefore, there is a need for a clearly defined VAT regime for charitable donations. In the author’s view, the economic destruction of unsellable goods by means of their donation appears particularly attractive.