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The festive season is a time when many businesses choose to give gifts to customers and business partners. Such gestures can strengthen business relationships and have a positive impact on the brand's image. In practice, however, the question arises: how should gifts be correctly accounted for tax purposes? Below, we provide a structured, expert discussion of the issue, based on current interpretations and tax authority practice.
Christmas gifts as tax-deductible costs
Christmas gifts for business partners can, as a rule, be included in tax-deductible costs if they qualify as promotional gifts (for example, they bear the company's logo) and are not regarded as representation expenses.
In practice, expenses whose primary purpose is to emphasise lavishness and prestige (such as expensive alcohol or luxury gifts) are often considered representation expenses. For this reason, even gifts bearing the company's logo should not be excessively lavish: it would be difficult, for example, to argue that a yacht with a logo attached is an ordinary promotional item.
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VAT on gifts for business partners
For VAT purposes, the regulations allow input tax to be deducted even where an expense is not tax-deductible for income tax purposes (for example, it may qualify as representation). This means that, in certain situations, VAT on the purchase of alcohol may be deductible.
Remember that giving gifts free of charge may require VAT to be charged, unless one of the statutory exceptions applies. In practice, it is accepted that:
- small gifts with an individual net value of up to PLN 20 do not require VAT to be charged when they are given,
- if a gift's value exceeds PLN 20 but does not exceed PLN 100 net, an exemption from charging VAT may apply, provided a record (list) of recipients is kept.
Income tax for the recipient
If a gift bears the company's logo and is promotional in nature, it is generally not treated as a benefit creating additional obligations for the recipient (up to PLN 200). The situation may be viewed differently where:
- the gift has no logo and is clearly personal in nature,
- its value exceeds PLN 200.
Importantly, this concerns customers who are consumers. If the recipient is a person running a business, receipt of the gift should be taxed.
Because tax authority practice and case law may change, if there are doubts about specific gifts (their type, value or recipient group), it is worth considering a consultation with a tax adviser.
If you found this article interesting, explore our tax advisory services and read how we can help you:
Summary
Gifts for business partners can be an attractive way to build business relationships, but accounting for them correctly requires knowledge of tax nuances. The key points are:
classifying the expense correctly (advertising versus representation),
accounting for VAT correctly,
assessing the tax consequences for the recipient.
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