10.3.1 How to determine whether a supply is made free of charge?

The first question is about how to determine whether a supply is made free of charge. The VAT treatment of supplies for consideration is fairly straightforward. However, the VAT treatment of supplies that are made for no consideration depends on a number of different factors.

The point is that free supplies are treated differently from supplies that are made for consideration, and therefore it is relevant to determine whether a supply is made for consideration. The question is a step in answering another question that comes next, which is how to determine whether the elements in a multiple-element supply that is made for consideration, are all supplied for consideration.

Supplies are made for consideration, and therefore not free of charge, where a direct link exists between a supply and the consideration received in return for that supply. A direct link in that sense exists if a legal agreement exists between the supplier and the recipient of the supply as a basis for the supply as well as for the agreed reciprocal consideration. Without a direct link between a supply and a consideration, or if a supply is made without an agreed consideration, the supply is made free of charge.