6.4.2 No taxation of the free supply of samples and of gifts of small value

The supply free of charge of samples and of gifts of small value is not taxed. In my view, the explanatory notes regarding the EU VAT rules don’t really clarify why this appropriation for giving gifts of small value and samples shall not be considered as taxable supply when they may be classified as overhead expenses from a tax point of view.1 From the fact that only ‘overhead expenses’ qualify, it seems to me that this should be considered a practical simplification, because under this simplification businesses won’t have to assess or determine the (extent of the) use or application for private consumption of these supplies.

According to Advocate General to the Court of Justice of the European Union Jääskinen in the EMI case,2 the purpose of excluding the supply of samples and gifts of small value from taxation must be to reflect the commercial reality that samples and gifts of small value may be necessary in order to promote a business and its products. In his view, there can be no other reason why the legislature would have sought to exclude them from the scope of the fundamental VAT rule according to which the consumption of goods by final consumers is subject to VAT.

Jääskinen argues in relation to samples that their primary purpose is not to satisfy a need of a final consumer, but to lead to an increase in transactions of the taxable person in question.3 In my view, it is clear from the relevant CJEU case law that it is not so much the ‘primary purpose’ of the supply that determines whether or not it should be taxed, but the extent of the use or application for private consumption of the supply. Maybe it can be argued that if the ‘primary purpose’ of a supply is business related, then the extent of the use or application for private consumption must be considered merely accessory to that or of secondary importance. In that case, Jääskinen’s opinion confirms what I wrote earlier.

As regards ‘applications for the making of gifts of small value’ given for business purposes, the legislature has in his view consciously decided to tolerate that they enter into final consumption without VAT being accounted for. However, he provides no reason for this conscious decision. Even though Jääskinen argues that the commercial reality is that gifts of small value may be necessary in order to promote a business and its products, I don’t see why that would only apply to gifts that have a small value. In my view, this is a purely practical simplification measure.