Country-specific updates: Germany

Donations in kind – possibility to reduce the VAT assessment basis temporarily

From 1 March 2020 to 31 December 2021, a temporary exemption for donations in kind is available pursuant to the newly issued letter of the Federal Ministry of Finance dated 18 March 2021.

The taxation of goods donated by retailers to tax-privileged organizations can be reduced to 0 EUR. However, this only applies to retailers who have been directly and not insignificantly negatively affected economically by COVID-19. This regulation only applies to donations made between 1 March 2020 and 31 December 2021.

The letter from the Federal Ministry of Finance clarifies that this tax basis of 0 EUR can only be applied in the case of worthless goods. As an example, the letter mentions food and non-food items shortly before the expiry of the best-before date or fresh goods that are no longer saleable.

This scheme applies in addition to the existing COVID-19 related fiscal relief measures and is intended to address the unique burden on retailers in the current situation.

In principle, donations in kind are subject to VAT insofar as the taxpayer has been entitled to an input VAT deduction. The relevant basis for the assessment of a donation in kind is the hypothetical purchase price at the time of the donation (and not, for example, the original acquisition price). The sale of an object far below the original purchase price is not a donation in kind. Generally, in this case it is not the hypothetical purchase price that is decisive, but the actual amount received.