In the context of its commercial relations, a company is often led to make business gifts to its partners (mainly customers). Tax and social rules regulate the business gifts granted by companies to their partners, which is why we have written this user guide that deals with the use of business gifts, then the tax and social legislation that frame them. Now let us have a proper look at the business gifts. Before taking a look at that you will need to understand that this is a very special option for you. So you will need to have a proper deal.
The Use of Business Gifts:
Delivering business gifts to key partners, usually at the end of the year or for a particular occasion, is a practice commonly used by businesses. This is something commonplace in certain sectors of activity, so much so that the partner sometimes expects his gift every year (I have lived). Making a business gift makes it possible for the company to please a partner, maintain contact and generate business when the marketing strategy is well thought out. This action also has the advantage of being able to devote only a small budget per gift.
Types of Business Gifts:
To increase the impact of the business gift on the recipient, you can also customize it. Choosing to offer personalized gifts like custom flash disk or IT gadgets may take more time, but the return on investment, direct or indirect, is generally much better.
Taxation of Business Gifts:
Business gifts made by a business are subject to special tax measures. Here are the rules applicable to VAT, deduction of taxable profit and declarations. These are the options that you will need to consider in every way. For that you will need to be specific about the details. The finest options are there and you will need to consider all details of the tasks. If you are specifically on this part, then it is for sure that the deals are there.
VAT on Business Gifts:
First of all, in order for the company to recover the VAT paid on business gifts, the unit value of the gift must not exceed 78dollars per beneficiary per year. Otherwise, the VAT is not recoverable.
Deduction of Business Gifts:
Purchases of business gifts are deductible from taxable profit if they are made in the interest of the business and are of a normal nature, valued according to the practices of the profession, the size of the business and the nature of the business importance of the partner.
Example: an SME that offers a car to a customer with whom it makes a small turnover performs an act that does not have a normal character. This example is a little excessive, but presents the idea of the normal nature of the business gift. You need to have a proper understanding of these gifts and how they practically work in the large arena. You need to be realistic in these cases and there comes the best of choices. However, you need to be specific on the part of the choices and there comes your satisfaction.
Keeping the Expense Reasonable:
Like all expenses in general, it is necessary that the expense is reasonable and committed in the interest of the company to be deductible. Fiscally, it is sometimes necessary to be cautious anyway when the company distributes it.
Declaration of Business Gifts Exceeding 3,000 Dollars:
Finally, the company is required to declare annual business gifts worth more than 3,000 dollars.
This declaration materializes on:
- The statement of overhead costs (form 2067) for companies,
- The 2031 declaration for sole proprietorships.
- Business gifts and labor law