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This research examines how current VAT regulations affect business donations and identifies potential legislative improvements.

July 26, 2026EC Tax Review0 citations

From Generosity to Taxation: The Destructive Role of VAT in Donations?

MMMadeleine Merkx MLMaxime Leenders DKDanya al Khfage

Key Points

This research examines how current VAT regulations affect business donations and identifies potential legislative improvements.
Analysis of EU VAT Directive and Member States' VAT policies on donations
Evaluation of compatibility with VAT regulations
Discussion of potential legislative changes to VAT treatment of donations
Current VAT laws create disincentives for donations, affecting social welfare and environmental efforts
Recommendations include modifying VAT regulations to exempt donations from VAT
Advocating for changes to avoid taxing entities that have rights to deduct VAT on donations

Abstract

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.

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