Humanitarian aid and VAT
These days we experience a great willingness to help our eastern neighbors, who find themselves in a situation that none of us would like to wake up to. There is also a number of tax questions connected to humanitarian aid that are good to know. Efforts to help from companies and businesses during this growing humanitarian crisis still fall under the existing legislation, which must be complied with.
Firstly, humanitarian aid in the form of goods is provided free of charge. And this free supply of goods can be problematic from a tax point of view (both from the point of view of VAT and income tax).
From the point of view of VAT, it is necessary to distinguish whether material humanitarian aid is provided by a business entity in the territory of the Slovak Republic or whether the given goods are exported to the territory of Ukraine.
In the first case, it is necessary to take into account the provision of the VAT Act, according to which the free supply of goods is generally considered a supply of goods for counter value, from which the business entity is obliged to pay output VAT, even if it has not received any counter value for the goods. In that regard, it is also necessary to take into account whether the business has deducted input VAT on goods which it has decided to donate free of charge for humanitarian aid. If the business entity has deducted input VAT on the goods, it is necessary to take into account that the tax administrator will expect to pay VAT on the output of these goods. For the purposes of quantifying this output VAT, it is necessary to proceed from § 22 par. 5 of the VAT Act. The basic rule for determining the tax base is the rule that the tax base is the price at which the goods were acquired, including the costs associated with the acquisition, and if the goods were created by own activity, the tax base is the cost of creating the goods by own activity.
In the case that a business entity purchases goods and it already knows at the time of purchase that it will be provided free of charge as part of humanitarian aid in the Slovak Republic, it is necessary to consider whether it can deduct input VAT at all when procuring these goods.
In the case of export of goods to the territory of Ukraine, it is possible under specific conditions to exempt such supply from output VAT (for example, the conclusion of a written donation contract between a business entity and the Ministry of Interior of the Slovak Republic is required).
Another formal obligation when exporting goods to Ukraine remains the need to make customs declarations for humanitarian aid as well. In addition, it is necessary to have a legible list of goods in accordance with the form, which is published on the financial administration portal, for the purposes of customs control.
The basic step for filing a customs declaration is registration with the customs authorities in the central register. The registration number for natural persons is their birth number and for other persons the so-called EORI number to be entered in the custom declaration. The provider - Humanitarian aid donors are advised to fulfill these obligations before arriving at the Slovak border crossing with Ukraine, or to hand over the aid to an organization that already has all the requisites for the customs procedure.
At present, it is possible to transport humanitarian aid to Ukraine through only two border crossings, namely the Ubľa - Malyj Bereznyj border crossing and the Vyšné Nemecké border crossing.
The transport of humanitarian aid only by vehicles up to 3.5 tons is allowed across the border crossing Ubľa - Malyj Bereznyj. For this volume of goods, it is also possible to lodge a customs declaration orally, but a list of exported goods must be attached. What the list should look like can be found here Form - Humanitarian Aid for Ukraine.
Of course, the customs declaration can also be made by electronic customs declaration at the inland branch of the customs office.
For freight transport without vehicle restrictions up to 3.5 tons, it is possible that humanitarian aid can be transported through the Vyšné Nemecké border crossing.
The export of humanitarian aid is not subject to quantitative restrictions.
Finally, from the point of view of income tax, we point out that if a taxpayer wants to claim tax expenditures, he can include humanitarian aid expenditures in the form of donations provided for material humanitarian aid abroad on the basis of a donation agreement concluded with the Ministry of the Interior of the Slovak Republic.