10.3.5 What should be the taxable basis or taxable amount for free supplies?

Under the current EU VAT rules, the taxable amount for the supply of goods for no consideration is deemed to 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 of the supply. This is different for the supply of services for no consideration. The taxable amount for fee services is the full cost of providing the services.

Because the taxation of consumption, or private use, should lead to a result that would put the recipient of these supplies in the same position as a regular customer, the taxable amount for the free supply of goods should be similar to the free supply of services. This would also ensure that the alternative system for ensuring taxation of private consumption, i.e. (retroactive) disallowing deduction of VAT on the cost of the supply, would lead to the same result. This would, however, require the current EU VAT rules to be changed.