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Corporate gift taxation: promotional gifts and business gifts

· Piia

Updated

In the taxation of corporate gifts, a customary promotional gift distributed to customers is fully deductible, and the Tax Administration guidance sets its limit at EUR 50 including VAT. Of the cost of a business gift chosen individually for a business partner, only 50 per cent is deductible and no VAT at all, and gifts to a company's own staff are covered by separate rules.

The prices on the product pages exclude VAT, so add the tax to the price of a corporate gift before comparing it with the EUR 50 limit. A calculation example is further down.

What is a customary promotional gift

The Tax Administration guidance Edustusmenot tuloverotuksessa (issued 29 November 2021) defines a promotional gift as follows: "A promotional gift is a mass-distributed gift of low value, given at the same time and in the same form to several recipients." According to the guidance, promotional gifts often carry the company's name or business symbol, such as a logo.

The same guidance states when a promotional gift can be regarded as customary: "A promotional gift whose purchase price including VAT is at most EUR 50 can be regarded as customary." The same limit appears in the VAT guidance Oman käytön ja alivastikkeellisten luovutusten arvonlisäverotus (issued 17 March 2020). If the company has made the gift itself, both guidance documents treat the probable transfer price of the goods as its value.

In the examples given in the guidance, customary promotional gifts include gifts distributed to customers on the company's anniversaries, christening and wedding gifts given to customers, and pens, shirts, ties and scarves bearing the company's name. The VAT guidance also mentions other gifts that are reasonable in relation to the nature and scale of the company's operations, such as household goods and decorations. In our range, such products include ballpoint pens, mugs and Christmas products that can carry the company's logo. However, the price of the gift and whether many recipients receive the same gift also affect whether it is customary.

Gift ideas for customers and partners can be found on the page Corporate gifts and customer gifts.

In taxation, a customary promotional gift is treated as follows:

Self-supply VAT is value added tax that a company generally has to pay when it gives away free of charge goods on which it has been able to deduct VAT. Section 25 of the VAT Act makes an exception for customary promotional gifts: "The transfer of goods as a sample or as a customary promotional gift is not regarded as taking the goods into own use."

What is a business gift

A business gift is given to a person outside the company with whom the company has a business relationship, for example on their anniversary. The income tax guidance distinguishes it from a promotional gift by how it is chosen: "A business gift is chosen more individually with the recipient in mind." A promotional gift is therefore the same for all recipients, whereas a business gift is chosen to suit the recipient.

According to the guidance, the aim of entertaining and hospitality is to promote business, for example by creating new business relationships or maintaining and improving existing ones. A gift given at the launch of a ship or the completion of a large construction project is also, according to the guidance, a business gift by nature.

The costs of a business gift are entertainment expenses. Under section 8, subsection 1, paragraph 8 of the Business Income Tax Act, the deductible expenses are "50 per cent of the amount of entertainment expenses". VAT on a business gift is not deductible at all. Section 114, subsection 1 of the VAT Act lists the purchases for which no deduction may be made, and these include "goods and services used for entertainment purposes".

Alcohol gifts

An alcohol gift is not usually treated as a promotional gift. The income tax guidance states: "In tax practice, alcohol gifts have been considered to be in principle related to entertainment." According to the VAT guidance, alcohol products are not customary promotional gifts.

An exception applies to microbreweries, wineries and other similar operators. Alcohol products that they have made themselves and distribute for advertising purposes can be regarded as customary promotional gifts if the general conditions for a promotional gift are met. Otherwise, the rules for business gifts apply to an alcohol gift in principle: in income taxation 50 per cent of the costs is deducted, and VAT is not deducted.

Gifts to your own staff

Gifts to a company's own staff are not business gifts, because entertainment expenses relate to people outside the company. According to the income tax guidance, a company can generally deduct costs relating to its staff in full, either as salary costs or as other expenses incurred to earn income.

The VAT guidance excludes staff gifts from promotional gifts: "Goods transferred to staff cannot be regarded as customary promotional gifts." When a gift is acquired for the private use of staff, the VAT on it is not deducted. If staff are given free of charge the same kind of logo products as customers, self-supply VAT must, according to the guidance, be paid on the transfer.

In the employee's taxation, a minor gift is tax-exempt when the practice applies to all staff and the gift is not given as money or a payment comparable to money. According to the guidance, such a gift is typically a small Christmas remembrance for all staff. A farewell gift can also be a minor gift if the practice applies to all staff. The guidance Henkilökuntaedut verotuksessa (issued 19 December 2024, in force from 1 January 2025) states the limit as follows: "The value of a minor gift may be at most EUR 100. If the employer gives employees a few minor gifts a year, their combined value may be at most EUR 100."

The gift may be an item chosen by the employer, an admission ticket, a service or a specified gift card. The employer can also let employees choose the gift from predefined options.

If the company has offices in different locations, the gift may differ between them for a justified reason related to location, as long as everyone receives roughly the same kind and value of benefit. According to the guidance, all staff also includes fixed-term and part-time employees. The gift can nevertheless be left out for, for example, short-term temporary workers or those on a probationary period, provided the exclusion is applied on the same grounds to all staff.

The guidance does not say whether the EUR 100 limit includes VAT. To be safe, calculate the limit from the price that includes VAT. The price excluding VAT is calculated in the same way as in the example below.

A gift card is tax-exempt for the employee only when all the conditions in the guidance are met:

According to the guidance, a gift card valid for the whole range of a department store or shop counts as the employee's salary. Christmas gift ideas for customers and staff can be found on the page Christmas gifts for companies.

Gifts for staff anniversaries, new employees and summer parties can be found on the page Staff gifts.

Anniversary gifts

A gift for an employee's anniversary has its own value limit. According to the guidance, customary anniversaries include, for example, a birthday when the employee turns 40, 50 or 60, as well as a wedding day, at least 10 years of service and retirement. A gift given when an employee turns 65, on the other hand, has not been accepted as tax-exempt in case law. The guidance says the following about the value of the gift: "The reasonable value of a gift given on an employee's anniversary is at most an amount corresponding to 1–2 weeks of the employee's gross pay."

In addition, the gift must be chosen by the employer, it must not be money, and the company must have a clear practice that applies to all staff. A gift paid as money is the employee's salary, even if it is called an anniversary gift. A gift card is acceptable as an anniversary gift when the employer has limited its use to an item or service purchased from a specific place, the card cannot be converted into money and it is given to a named employee.

When a gift is given in honour of the company's own anniversary, its value must be the same for all staff, and according to case law it cannot be as large as the value of the gift the employee receives on their own anniversary.

Price including VAT and the EUR 50 limit

The price on the product page includes one-colour print in one position but excludes VAT. The limit for a promotional gift, however, applies to the price including VAT, so the price excluding VAT is converted to a price including VAT before comparing.

Calculation example: according to the Tax Administration page Arvonlisäveroprosentit, the general VAT rate is 25.5%. Dividing EUR 50 by 1.255 gives EUR 39.84. This price excluding VAT is EUR 50 with VAT (EUR 39.84 + EUR 10.16 VAT = EUR 50.00).

The VAT rate for foodstuffs is 13.5%. With the same calculation, EUR 50 including VAT corresponds to a price excluding VAT of EUR 44.05 for a foodstuff (EUR 44.05 + EUR 5.95 VAT = EUR 50.00). The reduced VAT rate does not apply to alcoholic drinks.

On the product page, the price can be switched to show VAT included by selecting "incl. VAT". The unit price depends on the order quantity, and additional colours and additional print positions are priced in the quote. The final unit price including print is in the quote, so check the limit from it before ordering.

Once you have chosen the gift, add it to the quote basket. You can ask for prices for several products in the same quote request. Before production you receive a print proof for approval. Production starts once the proof has been approved. The exact lead time is stated in the quote.

Check your own company's situation at Vero.fi or with your accountant.

Sources

Frequently asked questions

What is the difference between a promotional gift and a business gift?

A customary promotional gift is a mass-distributed gift of low value that many recipients receive in the same form. Its costs are fully deductible, and a VAT-liable company may deduct the VAT on it. A business gift is chosen individually for a person in a business relationship, and 50 per cent of its costs is deducted. The VAT on a business gift may not be deducted.

Is the EUR 50 limit calculated from the price including or excluding VAT?

Including VAT. In both Tax Administration guidance documents, the limit applies to the purchase price of the promotional gift including VAT. Because the prices on the product pages exclude VAT, add the tax to them before comparing, or choose prices that include VAT on the product page.

Does a promotional gift become a business gift if it is given on an anniversary?

Not necessarily. According to the income tax guidance, an item of low value of the kind the company distributes for advertising purposes anyway does not become an entertainment expense even if it is given to a business partner as an anniversary gift.

Does the EUR 50 limit also apply to staff gifts?

No. The limit applies to promotional gifts, and goods given to staff are not regarded as promotional gifts. In the employee's taxation, the combined value of minor gifts may be at most EUR 100 a year, and the gift is given to all staff and must not be money.