6.5 VAT treatment of taxed free supplies: the taxable amount

Once it has been established that the application by a taxable person of goods forming part of his business assets for his private use or for that of his staff, or their disposal free of charge or, more generally, their application for purposes other than those of his business, is treated as a supply of goods for consideration, or that the he use of goods forming part of the assets of a business for the private use of a taxable person or of his staff or, more generally, for purposes other than those of his business, or the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business is treated as supply of services for consideration, the question rises whether this ‘treatment as a supply for consideration’ means that all relevant VAT rules apply to this supply.

In the current EU VAT Directive, the only provisions explicitly applying to these transactions that are treated as a supply for consideration concern the determination of the taxable amount for these transactions.

For the taxation of the application by a taxable person of goods forming part of his business assets for his private use or for that of his staff, or their disposal free of charge or, more generally, their application for purposes other than those of his business, the taxable amount shall be the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time when the application, disposal or retention takes place.1

For the taxation of the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business, the taxable amount shall be the full cost to the taxable person of providing the services.2