Are promotional gifts deductible?

Given that promotional gifts are one of the most popular methods to attract and retain customers, many people wonder if these expenses are deductible in the face of the tax agency. In this article we answer that question.

Advertising gifts, business gifts, merchandising or promotions with gifts. These are some of the methods to attract customers or even to keep employees motivated.

In this case, we will talk about promotional gifts. That is, of those items that we give away in order to give visibility to our products. So that you understand me, of the mythical pens, lighters or even umbrellas that they give you and that you end up using almost accidentally.

What do you mean if they are deductible?

The word deductible means if we can justify this expense as a company before the competent tax agency. This reduces profits and, therefore, reduces the amount of taxes that we have to pay.

See more about deductible expenses

So are promotional gifts deductible?

Depending on the country in which you reside, the tax authority may have made a different decision in this regard. So you should be careful, since the answer that I will give you below is only valid for Spain.

Advertising gifts are deductible. But not because the Tax Agency (AEAT) has ruled it this way, but because the Supreme Court established it this way in a ruling in 2021. Which has happened because, as the Supreme Court recognizes, there is no regulation that dictates in a manner precise this type of situation.

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And then what have they been based on?

The reason offered by the High Court is that these expenses are directly related to obtaining income. That is, if we use these techniques to build customer loyalty or to attract new customers, this is a promotional expense. And therefore it should be reported as one more marketing expense.

Thus, the judges understand that the direct correlation principle means that this action (giving advertising gifts) is aimed at obtaining better results (even when they are not achieved) and that, therefore, it is affected by the activity of the company.

The above does not mean, however, that advertising expenses are always deductible. Since what would not be under the protection of the law is to justify expenses such as advertising gifts, when in reality they are not.

For example, buy a mobile for my friend, justify it as a promotional gift and declare it as an expense. Unless we adequately justify this activity, we could have problems with finance. But if we do things well, not only can we, but we must deduce them.

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