Business gifts are standard practice for businesses in the course of business relationships with customers. These business gifts are subject to specific tax regulations. The business manager must be vigilant in the use of business gifts with his clients because the tax administration will not fail to rectify the business in the event of non-compliance with applicable legislation.
The entrepreneurs’ corner offers you a reminder on the tax rules to be observed in matters of business gifts and on the formalities related to this practice, so that you can make business gifts in full compliance with the legislation.
Business gifts to customers: VAT, deductibility and declaration
Can we recover VAT on expenses for business gifts?
In principle, the company cannot recover the VAT on the expenses of business gifts because it is prohibited to recover the VAT on the goods offered without consideration or for remuneration much lower than the normal price.
To assess whether the price claimed is much lower than the normal price, it is advisable to refer to the prices charged by the company for similar goods or, failing this, to market prices or even to their cost price. If the difference between the normal price and the actual price greatly exceeds the discounts and discounts generally granted, the conditions for exclusion are fulfilled. For the tax refund estimate this is important.
However, there are two exceptions to this rule:
Low-value goods: Business gifts give rise to the deduction of VAT when their unit value per beneficiary and per year does not exceed € 69 all taxes included (TTC). If several goods constitute the gift, the value of the whole must be taken into account. Distribution costs must be taken into account in determining the value of gifts;
Advertising displays: Expenses relating to advertising displays with a unit value of less than € 107 including tax given free of charge to a beneficiary who helps to distribute the company’s products give rise to the right to deduct VAT. These goods must be intended for the sale, promotion, storage or presentation of the products and their delivery must be justified by the commercial activity of the company.
Finally, here are some specific cases:
Samples: the company can recover the VAT on the expenses relating to the purchase of samples given to customers free of charge, provided that these do not give rise to final consumption of products.
Sponsorship: the company can recover VAT on expenses relating to gifts given for the sponsorship of new customers.
Companies exempt from VAT are not affected by these rules since they do not recover VAT on all of their expenses.