There are various factors to be considered while assessing whether a donation made is out of scope or not. Some of such matters are listed below:
• Whether the donor will receive any benefit in return for the donation?
• Whether any other person other than the donor will receive any benefit in return for the donation?
• Are there any conditions attached with the donation for its intended way of use that may benefit the donor or any other person?
• Is there any agreement between the parties involved in the donation? If yes, what are its implications?
What are the considerations to be given on determining the VAT treatment on sponsorships?
In most of the cases, when it comes to sponsorships, the person receiving the payment makes supplies to the sponsor in one way or another. Given below are few points which are indicative that the sponsor is receiving some benefit out of the sponsorship.
• The receiver displays the sponsor’s logo
• The sponsor gets the privilege to use the name of the receiver of sponsorship for any kind of endorsement
• The receiver provides any kind of entertainment services to the sponsor
• The receiver arranges for hosting the sponsor in restaurants
• Sponsor receives access to tickets or events
Hence it is very important to analyze the transactions of sponsorships on a case to case basis holistically based on the available facts and circumstances to determine the appropriate VAT treatment.
