ciers, customers, consultants etc.) , these are also deductible as an expense for your accounts under certain conditions. We’ll explain it to you!
Business gifts in accounting
Gifts have an amount of specific rules before they are deductible. We’d like to give them to make sure that business gifts end up in your accounts in the best possible way for tax purposes.
There are two things to consider when purchasing a business gift: the recoverable vAT and the extent to which you may enter the cost in your accounts. We take a closer look at the two questions you need to ask yourself.
1. Can you recover VAT on a gift?
Are you not subject to VAT or exempt from VAT? Then you should not worry about this at all, because you cannot recover VAT anyway. Then you can take the entire purchase price, including VAT, into account for the costs.
Are you subject to VAT? Then the next rules apply:
- If the gift costs more than €50 (excl. VAT): never recoverable VAT
- If the gift costs less than €50 (excl. VAT): VAT fully recoverable, under two conditions:
1) One gift per calendar year per business relation!
For example, if you give several gifts that together are worth less than €50, even then you can only recover the vAT on one of those gifts of your choice.
2) VAT is never recoverable on smokes or spirits, even if the purchase value amounts to less than €50.
2. Is the expense deductible for your accounts?
An important point, because income – costs = profit; and on that profit you pay social security contributions and personal income tax.
The rules are a little simpler here: business gifts are 50% deductible as expenses, but only if the purchase value does not exceed 125 euros (incl. VAT this time!).
A gift of more than 125 euros (incl. VAT, per gift, per person) is indeed 100% deductible for your accounts if you draw up a tax return. That may sound tempting, but pay attention because you have to draw up a tax return!
If you give a business gift of more than 125 euros to someone, a benefit in kind (via a tax form) must be declared for that person. In other words, the other person will have to pay taxes on the value of your gift. The recipient of the business gift must declare its value in his personal income tax and will be taxed on it as if he had received a salary for that amount.
If you do not prepare a tax sheet for a gift above EUR 125, the cost will not be deductible for sole proprietors’ accounts! Please note, we are specifically talking about the rules for a sole proprietor here. If you would like to know more about these rules for the company, you can take a look at the UNIZO website.
Tip: The 50% limit does not apply to advertising articles. Think of the classics such as calendars, pens, key rings, … on which the company logo or the like is stated. In such a case, we are talking about advertising and no longer about a business gift. The purchase value may be 100% in your accounts and of course you may also recover 100% of the vAT % in such a case. Regardless of the purchase value!
Did you know?
If you purchase business gifts, write the name of the person you are giving the gift to on the purchase document or enter the names in Dexxter when entering the document in the accounts.
After all, it shows much better during tax audits if you have already spontaneously written down the names of the recipients of business gifts. Moreover, a tax inspector may always question who the recipient was of the gift and in what context it was, an inspector must be able to assess whether it was professional. Always useful then if you don’t have to go searching who specifically received that gift, note it down on your document immediately.
