Are promotional gifts tax deductible?

Business gifts are a great way to show your business associates that you appreciate them. Beautiful gifts are often handed out, such as notebooks, chocolates or a bottle of wine. But how tax deductible are these gifts and what are the best gifts for tax purposes?

There are a number of things that determine to what extent you can recover the VAT paid via your VAT return, and whether you can include the expense as a deductible professional expense for tax purposes to reduce your taxable base.

It is important to know that a distinction is made between promotional items, premiums and business gifts. Read more about the difference between promotional items, premiums and business gifts here

Promotional items

Promotional items are there to increase brand awareness. A promotional item must meet the following conditions:

• Printed with company logo.
• Have little value to the recipient.
• To be distributed in large numbers.
• Not specific to certain (groups of) customers.
• Consumables (such as spirits and chocolate) and luxury items are never promotional items but are business gifts.

VAT
The VAT on promotional items is 100% recoverable.

Tax deductible
Advertising articles are 100% tax deductible.

Premiums

Premiums are intended to promote the sale of certain products and are, for example, given away as a gift with a purchase. They meet the following conditions:

• The customer receives the product when spending a certain amount.
• The customer receives the product when purchasing a certain number of products.
• The product is stated on the invoice together with the purchased products.
• The product may not be given away for free without purchase.

VAT
The VAT on premiums is 100% recoverable.

Tax deductible
The costs of purchasing premiums are 100% tax deductible.

Promotional gifts for customers & other business relations

Promotional gifts are all gifts for a limited category of customers or other business relations, such as, for example, drinks, flowers, chocolates and luxury items. Products are promotional gifts if:

• They are for a limited group of relationships.
• They are consumables such as wine & chocolate.
• They are luxury items such as valuable pens and timepieces.

VAT

• Gift < €50 excl. VAT: VAT is 100% recoverable.
• Gift > €50 excl. VAT: VAT is not recoverable.
• Tobacco products and spirits (+22%): VAT is not recoverable.
  Note: Wine and champagne are not considered spirits.
• The VAT deduction only applies to goods, not to services such as entrance tickets and subscriptions to cultural and sporting events.
• A maximum of one gift per customer per year is eligible for the VAT deduction.

Tax deductible

• Gift < €125 incl. VAT: The gift is tax deductible for 50% and not taxable for your relation.
• Gift > €125 incl. VAT: In this case there are 2 options:
  • You have a sole proprietorship and are subject to personal income tax. If you state the gift on your tax form, the cost is 100% tax deductible. However, your relationship will be taxed in that case. This seems to us to be a less interesting solution.
  • You have a company and are subject to corporate tax. In this case, you also prepare a tax form.

Tip: give one promotional gift per year per customer for less than €50 excl. VAT with the logo of your company clearly & permanently affixed. Then the gift falls under promotional items and is 100% tax deductible and the VAT is also 100% recoverable!

Applying a sticker to the gift is not sufficient, because a sticker can be easily removed and therefore does not have a "permanent" character.

Consumables such as wine and chocolate are always business gifts, even if they have a sticker on them.

Promotional gifts for employees & their children

VAT
The same rules apply here as for promotional gifts to customers & other business relations.

Tax deductible

• Gift < €40 incl. VAT per year per employee: The gift is tax deductible for 100%, if the following conditions are met:
  • All employees get the same benefit.
  • The gift is for a specific event (Sinterklaas, Christmas, New Year).
  • The amount may be increased by €40 (incl. VAT) per dependent child.
• For an honorable award, a gift of max. €120 (incl. VAT) per employee is tax deductible.
• A gift resulting from a marriage or legal cohabitation is tax deductible if it costs max. €245 (incl. VAT).

Tip: give one promotional gift per year per employee of less than €40 incl. VAT (possibly increased for dependent children or special events) with the logo of your company clearly & permanently stated, because then the gift falls under the promotional items. Not only is the gift then 100% tax deductible, but the VAT is also 100% recoverable!

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