By making donations businesses can alleviate poverty, reduce disposal and public expenditure on welfare and mitigate environmental harm. Under EU VAT donations may however result in the payment of VAT, whereas destruction does not. This article explores in what way the current VAT treatment of donations under the EU VAT Directive as well as EU Member States’ national VAT legislation impedes donations and which legislative changes can be considered to alleviate those impediments. It analyses the rules under the EU VAT Directive as well as Member States’ VAT policies on donations and their compatibility with the VAT Directive. It also explores options to change the VAT Directive by freeing donations from VAT, requiring adjustments of VAT in case of destructions or to abstain from levying VAT on donations to parties which have a right to deduct.
EC Tax Review