Food Banking

DONATIONS MADE WITHIN THE SCOPE OF FOOD BANKING

I- Goods that may be donated and the nature of the donation

Donations made within the scope of food banking must be in the nature of food, cleaning materials, clothing or fuel. Such donations must be made conditionally (to be distributed free of charge to those in need).

Products that are not in the nature of food, cleaning materials, clothing or fuel are not considered donations within the scope of food banking.

The articles of association or deed of the association or foundation accepting the donation must contain provisions allowing it to provide food, cleaning materials, clothing and fuel assistance to those in need. That said, it is of no importance for this application whether the association or foundation also operates in other fields, or whether it is an association working for the public benefit or a tax-exempt foundation.

II- Tax advantages provided to donors subject to income and corporate tax

1- Where goods included in a commercial enterprise (food, cleaning materials, clothing and fuel) are donated, the cost value of such goods is recorded as an expense within the framework of Article 40 of the Income Tax Law. This is effected by recording the invoice as an expense on the one hand.

2- Donations made within the scope of food banking are exempt from Value Added Tax pursuant to Article 17/2-b of Law no. 3065. VAT taxpayers shall declare the total amount of donations made in a taxation period by including it in lines 6 and 7 of the return for the relevant period.

Pursuant to Articles 30/a and 32 of the same Law, the amount of VAT incurred in respect of this delivery of a partially exempt nature (donations of food, cleaning materials, clothing and fuel) may, as of 01.01.2019 and by virtue of the provision added to the article by Law no. 7104, be deducted where shown on the purchase documents of the goods and services subject to the donations set out in Article 17/2-b of the VAT Law or included in the cost of those goods and services.

3- Where the donated food, cleaning materials, clothing and fuel are not included in the enterprise, the cost value of such goods shall be entered in the section of the annual return relating to donations and aid, within the framework of Article 89 of the Income Tax Law and Article 8/1 of the Corporate Tax Law, and taken into account as a deduction in determining the tax base.

III- Document to be issued by the donor

Within the framework of the provision added to Article 40 of the Income Tax Law, donations to be deducted must in all cases be documented by an invoice (cash register receipts are not accepted), even if the value of the donated goods falls below the invoicing threshold set out in Article 232 of the Tax Procedure Law, and a delivery note must additionally be issued for transport.

The invoice, on which the information relating to the donated goods is written in full, shall be issued in the name of the association or foundation receiving the donation. The cost value of the donated goods excluding VAT shall be written on the invoice as the value of the goods.

It is not a requirement that the donating person or institution be engaged in the trade of food, cleaning materials, clothing or fuel. Even if the donor does not trade in the products subject to the donation (e.g. an electrician, a pharmacist), they may donate the materials mentioned above (food, cleaning materials, clothing and fuel) within the scope of food banking.

It is mandatory to write on the invoice the statement “No VAT has been calculated as the goods are donated on condition that they are given as aid to those in need”.

Even if the donating person/institution does not trade in food, cleaning materials, clothing or fuel (an electrician, a pharmacist, etc.), they may donate the materials mentioned above within the scope of food banking. In such cases:

- The purchase invoice for the materials to be donated shall be issued in the name of the donor.

- The donor shall issue their own invoice covering the same materials in the name of the association/foundation to which the donation will be made, in the form described above.

IV- Document to be issued by associations and foundations

Associations and foundations shall issue the documents required by their own legislation and provide a copy to the donors.

Invoices issued by those engaged in commercial activity shall be retained by the association or foundation.

V- Bookkeeping, VAT exemption and declaration in returns

Where goods included in a commercial enterprise (food, cleaning materials, clothing and fuel) are donated, the cost value of such goods is recorded as an expense by enterprises subject to both income tax and corporate tax, within the framework of Article 40/10 of the Income Tax Law. This is effected by recording the invoice as an expense on the one hand and as income on the other.

VAT taxpayers shall declare the total amount of donations made in a taxation period in the line “229 - Food, Cleaning Materials, Clothing and Fuel Donated to Associations and Foundations Engaged in Food Banking Activity”, in the table “Transactions Within the Scope of Partial Exemption” under the tab “Exemptions - Other Transactions Giving Rise to a Right of Refund” of the return for the relevant period. The input VAT line is the VAT paid by the donor upon purchase of the goods subject to the donation. Since VAT paid on purchase is not subject to refund, you may also declare this line as zero.

Status of input VAT:

- Under the provision applicable before 01.01.2019:

Since the donations were exempt from tax, the value added tax shown on the purchase documents relating to them or included in the cost of those goods and services could not be deducted.

It was not possible to deduct the amount of VAT incurred in respect of this delivery of a partially exempt nature. Non-deductible VAT could be recorded as an expense or cost pursuant to Article 58 of the VAT Law.

For this reason, in the period in which the donation was made, the amount of VAT incurred on the acquisition of the donated goods had to be calculated and included in the VAT return for the same period, and the same amount had to be removed from the “deductible VAT” accounts and transferred to expense accounts.

- After 01.01.2019:

By virtue of the provision added to the article by Law no. 7104 (the parenthetical provision in Article 30/a of the VAT Law was added by Article 9 of Law no. 7104, published in the Official Gazette dated 6 April 2018 and numbered 30383, and entered into force on 01.01.2019), the value added tax shown on the purchase documents of the goods and services subject to the donations set out in Article 17/2-b of the VAT Law, or included in the cost of those goods and services, may be deducted.

Where the donated food, cleaning materials, clothing and fuel are not included in the enterprise, the cost value of such goods is entered by taxpayers in the section of the annual return relating to donations and aid, within the framework of Article 89/6 of the Income Tax Law and Article 8/1 of the Corporate Tax Law, and taken into account as a deduction in determining the tax base.

Examples:

1) Where Mr A, who trades in materials falling within the scope of food banking (food, cleaning materials, clothing and fuel), wishes to donate rice held in stock:

- He issues a sales invoice based on the cost value of the rice.

- He issues the invoice to the foundation/association without calculating VAT, writing on it the statement “No VAT has been calculated as the goods are donated on condition that they are given as aid to those in need”.

- On the basis of that invoice, the relevant aid organisation issues its own donation receipt in the name of the donor.

2) Where Mr B, who does not trade in materials falling within the scope of food banking (food, cleaning materials, clothing and fuel), wishes to donate rice he will purchase:

- The company from which he purchases the rice issues the invoice in the name of the donor.

- Using the invoice belonging to himself/his company, the donor issues a rice invoice in the name of the foundation/association to which the donation will be made. The invoice must bear the statement “No VAT has been calculated as the goods are donated on condition that they are given as aid to those in need”.

- On the basis of that donor invoice, the association/foundation issues its own donation receipt in the name of the donating person/company.