Donations to Ukraine – material aid and VAT
- Jana Kolářová
- Richard Knobloch
In the current situation, sending various humanitarian aid to Ukraine is more than topical. Transport of aid sent in the form of necessary goods is usually organised by humanitarian organisations (e.g. People in Need), to which the goods are handed over domestically. In this context, we would therefore like to draw your attention to the provisions of article 68 paragraph 15 of the VAT Act, according to which the supply of goods to humanitarian and charitable organisations that send or transport them to a third country as part of their humanitarian, charitable or educational activities outside the territory of the European Union is “exempt from tax with the right to deduct”, and to the interpretation of the General Financial Directorate (current information available on the GFD website).
It follows from the above that if the taxpayer acquires the goods directly for such a supply which is part of the aid for Ukraine, he cannot claim a deduction on their acquisition. On the other hand, if the taxpayer initially purchases the goods for his own economic activity and subsequently decides to donate them to Ukraine, he can claim a VAT deduction on the purchase. Their gratuitous supply will be subject to tax in the sense of article 13 paragraph 4 letter a) and (5) of the VAT Act, but will be exempt from tax under the stipulation of article 68 paragraph 15 of the VAT Act. The exemption can best be proven by a receipt of the material donation from a humanitarian or charitable organization (indicating the scope of the goods and the identification of the supplier – donor), which will also include the destination in Ukraine. We therefore recommend that you prepare such a declaration and request its completion and, in particular, confirmation. Such a supply of goods should then be rendered on line 26 of the VAT return.
The difference in the two situations may, in our opinion, be difficult to prove and the question is how the tax administration will treat these supplies. However, at a minimum, the above definition implies that the use of the exemption should apply to different types of stock or the taxpayer’s own products.
If the goods were not shipped or transported to a country outside the EU, i.e. to Ukraine, the donation would be subject to VAT, or it would not be possible to use the above exemption. We therefore recommend that, if possible, you also obtain customs documents or other proof of export to Ukraine from the humanitarian or charitable organisation.
The VAT exemption is also not available in cases where goods destined for Ukraine will not be provided to a humanitarian organisation or in cases where the taxpayer himself would ensure their transport and subsequent distribution on the spot.
In case you are currently dealing with this topic and do not know what to do, please do not hesitate to contact us. We will be happy to help you.
Author: Richard Knobloch, Jana Kolářová