Gifts in business - Tax and social consequences

We are now all preparing the Christmas season and as you know, at this time it is customary in many companies to give gifts to people in business relationships or to employees. So we wanted to recapitulate, through this article, the consequences of these gifts on the determination of the tax result as well as on the recovery of VAT for these two gift categories. Also, for the gifts to employees, we will observe the effects on social contributions.

 

GIFTS IN BUSINESS  - TAX AND SOCIAL CONSEQUENCES

 

At the end of the year, it is customary in many companies to give gifts to people in business relationships or to employees.

We will recapitulate, through this article, the consequences of these gifts on the determination of the tax result as well as on the recovery of VAT for the following gift categories :

  • Gifts to people in business relationship ;
  • Gifts to employees.

For this second category we will also observe the effects on social contributions.

 

I-BUSINESS GIFTS

  1. Tax deductibility

These gifts may be included in the deductible expenses of the tax benefit if they are made in the interest of the company. They must also have a lawful cause and their value must not be exaggerated.

The exaggerated value must be appreciated or not according to the circumstances, the size of the company and the uses of the profession.

It should be noted, however, that the case law does not require the legitimate cause.

When an executive personally offers the gifts to customers or suppliers and is then reimbursed by the company, the expense is deductible if it is made in the interest of the company and if its value is reasonable.

For the company executive, this refund is exempt from income tax.

When the gifts are not deductible expenses for the company, the reimbursements paid to the manager constitute a supplement of taxable remuneration. It will be able to deduct the expenditure made if it has opted for the deduction of real expenses, otherwise this expense is included in the standard deduction of 10%.

Finally, it should be noted that the total amount of gifts must be indicated on the "RELEVE DE FRAIS GENERAUX" (N ° 2067 form, attached annually to the tax report) when the annual amount exceeds € 3000.

 

  1. VAT rules

In any case, when a good is sold without remuneration or for a price much lower than its value, it is not possible to recover the VAT on the purchase price or the cost price of this good. But there are exceptions to this rule, which are :

  • Objects of very low value : The VAT remains recoverable on the offered objects whose cost price (including the cost of packaging, port, etc.) does not exceed € 69 VAT included per beneficiary and per year.
  • Promotional materials : For VAT to be recoverable the material must meet the following conditions :
  • The cost of advertising material must be borne by the company that manufactures or markets the products ;
  • This material must be intended for the marketing of products ;
  • The supply of equipment must be justified by commercial needs.

In spite of the conditions mentioned above, the VAT on the purchase of advertising displays remains deductible when the unit value is less than € 107 including VAT.

  • Samples : The VAT relating to the acquisition of samples is deductible whatever their value if they are given free of charge to the customers and if they do not lead to a final consumption of goods free of VAT.
  • Specimens : VAT can be deducted regardless of their value when the word "SPECIMEN" is clearly and indelibly written on the object. It is necessary, in addition, that the number of objects given free is not unreasonable.
  • Gifts offered to a client domiciled in another state of the E.E.C. : The same requirements are required for VAT recovery as when offering a gift to a French customer. In so far as the good is delivered free of charge to a recipient, there is no need to declare an intra-Community supply.

 

  1. Social contributions

When a company offers gifts or gift vouchers to one or more employees of another company because of an activity or services rendered by these employees, these practices lead in principle to the payment of social security contributions in the amount of the gift offered.

The administration states however, that these gifts do not have to be subject to social security contributions when they are offered by a supplier to the employees of client companies on the condition that the beneficiary employees have not exercised any activity in the interest of the supplier.

 

II-GIFTS AND GIFT VOUCHERS OFFERED TO EMPLOYEES

  1. Social rules

At the time of certain events, and especially at Christmas, the “Comité Social Economique” (C.S.E.) or the works council (C.E.) or the employer itself can offer to employees gift vouchers.

These gift certificates are in principle subject to social contributions as they are not given as a help.

However, no contribution is payable in the two following cases :

1. The value of gift vouchers does not exceed € 169 per employee per year, so in this case the exemption applies regardless of the event to which it is attached.

Beyond the ceiling of € 169 gifts and gift vouchers are only exempt if they meet the following specifications :

  • They are in relation with a specific event (wedding, birth, retirement, mother's day or father's day, etc.) ;
  • The gift voucher is offered for use in connection with the event but it cannot in principle be exchanged for food or fuel. However, when the event does not make it possible to determine the nature of a specific good, it is possible that the gift voucher gives access to all departments of a store with the exception of food products and fuel ;
  • The value of the gift voucher must be in accordance with the usual practice, usually € 169 per event and per calendar year.

2. Culture vouchers, so they are totally exempt from contributions on the condition that they only give access to goods or services of cultural nature (cinema, shows, books, entrance tickets to museums or historical monuments, etc.).

 

  1. Tax rules

These gifts can be deducted from the tax profit by the company. In addition, they do not constitute a taxable salary for the beneficiary employee when their value does not exceed € 169 per event and per calendar year.

Some social expenses such as payments to the C.S.E. or the share of the meal vouchers supported by the employer are deductible without limitation of amount.

The company must mention these gifts on the “RELEVE DES FRAIS GENERAUX” when the beneficiary employees are among the highest paid people.

 

  1. VAT rules

Gifts offered to employees are not eligible for the VAT deduction unless they are of very low value. To open right up to recovery they must not exceed € 69 per object, per year and per beneficiary.