A charity sells second-hand goods for €1. The proceeds are used to fund education for the children of asylum seekers and refugees. The Gelderland District Court rules that the foundation must pay VAT on its turnover.
ANBI
Since 1 January 2017, the foundation has been recognised as a Public Benefit Organisation (ANBI). It receives second-hand goods (free of charge) from donors. These include books, clothing, CDs and similar items. It sells these items in its euro shop (a footnote indicates that this refers to the Refugee Children’s Foundation). A limited number of books and items of clothing are sold as “remnants” for €0.50. Occasionally, items are sold for a higher price (€5).
The Tax and Customs Administration takes the view that the foundation must pay VAT on its turnover. It is therefore issuing a supplementary assessment for the second quarter of 2017. The assessment amounts to €100 in VAT and €3 in tax interest.
Onerous title
For VAT purposes, a taxable transaction occurs when a supply (goods or services) is made in return for payment. In other words, there must be a consideration. This is the case here. The payment of €1 is in return for the supply of the second-hand goods.
Symbolic
The foundation therefore argues that the payment is (no more than) symbolic. In that case, there is no basis for VAT liability. The Court, however, is of the opinion that the payment of €1 is the actual consideration for the goods supplied. The amount of the payment is determined entirely by the foundation. Furthermore, the sale is intended to generate proceeds. These proceeds are then used to achieve the foundation’s objective.
The Court also considers that the sale of second-hand goods to people on lower incomes is an additional objective of the sales. Essentially, supply and demand are brought together. The foundation offers second-hand goods at a price appropriate to its target group. The remuneration therefore has social significance.
Proof
The foundation has argued that a price of €1 is commonly regarded as symbolic. In so far as the intention is to argue that €1 is, by definition, symbolic, the Court does not agree. In the property market, €1 is regarded as a symbolic price, but this is in relation to the much higher economic value of property.
Nor has the foundation demonstrated that fees for similar services in the wider community are significantly higher. A limited number of examples of prices four or five times higher in charity shops is not sufficient to regard a payment of €1 for second-hand clothing in general as symbolic.