Recent floods in parts of Croatia, which left some residents of flooded areas trapped in their homes for several days or evacuated, have brought to the forefront the issue of tax implications of food donations and donations of animal feed. Donors do not pay value-added tax on donated food and animal feed, but under prescribed conditions. Producers, traders, and other business entities can donate food nearing its expiration date tax-free. Food for which the producer has marked a specific expiration date can be donated before that date, and food marked by the producer as best used by a certain date or month can be donated even after that date or month has passed. Animal feed can be donated if it meets safety and health standards as regulated by special regulations.
Limitations and Responsibilities
These limitations are defined by the Agriculture Act and regulations governing the safety of food and animal feed. Donating food, in terms of the obligation to comply with food safety standards, is equated with placing food on the market, so donors and other entities involved in the food donation chain are responsible for the safety of the food and must adhere to hygiene and sanitary conditions just as for food intended for commercial sale.
Direct donations of food and animal feed from producers and traders are not tax-exempt, except in cases of natural disasters. Only in the case of a declared natural disaster can producers and traders directly donate food to victims. In all other situations, food nearing its expiration date and animal feed can only be donated through authorized and registered intermediaries. Any legal or natural person interested in mediating food and animal feed donations is required to register in the Register of Food Donation Intermediaries maintained by the Ministry of Agriculture. The register is publicly available on the ministry’s website and currently lists 139 organizations that collect food and animal feed for free distribution to those in need. The register mainly includes non-profit organizations engaged in humanitarian aid distribution, religious organizations, and other non-profit organizations whose missions and objectives are related to humanitarian purposes. It is prohibited to sell donated food and animal feed. Both donors and intermediaries in the food donation chain must keep records of the types and quantities of donated food and animal feed.
Obligations of Donors
Donors must keep records that prove their right to exemption from value-added tax on donated quantities and their right to have these values recognized as tax-deductible expenses when determining the tax base for profit tax. Producers and traders who donate food must provide credible documents showing the number of the delivery note or outgoing warehouse, the date of food donation, the type, common name, and expiration date of the donated food, as well as other data as regulated by accounting regulations. A donor who is a VAT taxpayer and has used input tax on the food they donate does not charge VAT on the delivered donated quantities. For control purposes, they are required to submit data on the value of donated food and animal feed to the Tax Administration using form DONH. The form is submitted electronically through the eTax system, within the deadlines prescribed for VAT calculation. Taxpayers who calculate VAT monthly must submit it by the 20th of the following month, while those who calculate VAT quarterly must submit it by the 20th of the month following the quarter in which the food was donated. For accounting periods in which no food donations were made, the form is not submitted. Business entities that are not VAT taxpayers and donate food and animal feed are not required to submit form DONH.
