HoHoHo this is the period of the year.
A bottle of wine, a pen with your logo or something more personal.
To keep the relationship with your customers or suppliers warm, you can offer a gift especially during this period of the year.
Special VAT rules apply to business gifts; When does something consider as a business gift? And is the VAT on business gifts deductible? Let’s dive into this interesting topic!
Business gifts VAT deductible (input tax)
> Threshold amount of VAT business gifts
Business gifts are subject to a threshold amount. For gifts up to €227 per relation per year (excluding VAT), the VAT paid is fully deductible for you as giver. This also applies if your business relation is a private individual and is not a VAT entrepreneur himself.
If you give presents to several contacts within the same company, you must add up the amounts. You may end up exceeding the threshold amount per contact per year.
> Business gifts above threshold amount
For business gifts above the threshold amount, there is an additional rule.
You may then only deduct VAT if your business relation is also subject to VAT and would have been able to deduct the VAT of your gifts on their own purchase.
1- Suppose you send your photographer a concert ticket of her favourite artist for €245 (excl VAT). The cost of the concert ticket exceeds €227 and the photographer is not allowed to book the cost of a concert visit itself as a business expense. The VAT is therefore not deductible.
2- What if, you would give her a new lens for €300 (excl VAT) for a camera? Then she could also declare this cost as a business expense herself. So, if you give this to her as a business gift, you may be able to deduct the VAT costs.
Business gifts income tax return rules
However business-like related these expenses are, you cannot fully report them in your bookkeeping.
According to the Belastingdienst, these costs are mixed costs: business expenses with a private nature.
As with consumption costs, you must therefore make a correction in your tax return declaration to adjust the private part. You can choose to do it between two ways:
1- The first €4,600 spent are not deductible. Anything you spend above this amount is fully deductible.
2- The full amount of the spent costs is 80% deductible. At the end of the year, you correct 20% from the total costs of consumptions and business gifts into your bookkeeping.
Not sure how to do it? Just click here!