Do you give away samples or gifts to your customers? Make sure you don’t have to issue an invoice! – Transfer free of charge

May 12, 2020

The Goods and Services Tax Act of 11.03.2004 indicates that, as a rule, the delivery of goods for consideration is subject to tax. However, the legislator imposes tax also on benefits free of charge. It is worth taking a closer look at this topic, because this situation can also take place in your company. Article 7 par. 2 of The Goods and Services Tax Act of 11.03.2004 indicates that the free transfer of goods is subject to VAT, if the taxpayer was entitled in full (or in part) to reduce the amount of due tax by the amount of input tax on the purchase or manufacture of these goods or their components.

Gifts and samples – purchase price lower than PLN 10

Very often, some companies wanting to attract new customers or keep regular customers, carry out a number of marketing activities. Especially trading companies, that wants to encourage to buy their products, giving away their goods to present their properties and advantages. If the goods provided to the customer are in the form of a sample referred to in art. 7 par. 7 of the Act on tax on goods and services, or the unit purchase price is lower than PLN 10, the company does not have to tax the transaction of free transfer.

Gifts – purchase price 10.01 – 100 PLN

If the purchase price of a handed over gift is in the range of PLN 10.01-100, and the taxpayer decides not to keep the records* referred to in art. 7 par. 4 of the Act, such transfer will be subject to VAT. This will result in the due tax being shown in the VAT return over the period in which the transfer took place. It is also worth mentioning that the limit on transfers made in the records that would not have to be taxed in one year for 1 taxpayer is PLN 100.

*Records allowing identification of persons who are recipients of the gift being transferred

Gifts – purchase price higher than PLN 100

The unit purchase price of the transferred goods higher than PLN 100 immediately raises the obligation to tax the transaction.

The tax base for such a transfer free of charge is established as the purchase price of the goods (excluding value added tax), and when the purchase price cannot be determined, the taxable amount is the cost of production determined at the time of delivery of those goods. If such situations occur in your enterprises, we have prepared a helpful scheme of action based on the Act. And if you have additional questions, please contact us.

Autor: Agnieszka Siwa-Kogut

Tags invoices, transfer free of charge, vat