Business gifts: what the taxman tolerates

At the end of the year, many companies play Santa Claus with their customers and suppliers. But can we offer everything? Are there ceilings not to be exceeded? The point to avoid setbacks with the disc.

It's time for gifts this December. And not only with family. Businesses are used to offering corporate gifts wholesale singapore to valued customers or zealous suppliers, in order to maintain good business relations over the coming year. Bottles of wine, chocolate boxes, places of entertainment, stay in the sun ... These expenses may be subject to some tax breaks . The simplest case concerns articles whose value is less than 65 Dollar. The company can then recover the VAT on these goods intended to be offered.

A gift for 20,000 Dollar

It can also deduct these expenses from the taxable result. "The company must be able to justify that the expense is not exaggerated and that it was made in the direct interest of the company," says Vital Saint-Marc, partner at RSM, audit firm , consulting and chartered accountancy.

The main concern is that the tax administration has not set a ceiling, so it is up to everyone to assess the text according to his situation. This can pamper some valuable customers. Like this entrepreneur who offered a Breitling watch worth 20,000 Dollar. "He wanted to thank his biggest customer, who bought him more than 100 vehicles a year, and even though the amount spent seems huge, its value is consistent with the benefit to the company,and can quite justifiable in the eyes of the tax administration. While the latter may be more frenetic if another company decides to offer a getaway in the mountains to a person who is neither a customer nor a supplier.

The taxman also monitors the beneficiaries

Another practice that may make the administration tick: an exaggerated increase in the budget devoted to gifts. "The general tax code indicates that the amount must grow at the same time as the turnover of the company," says Vital Saint-Marc. A company that goes from a bottle of Dom Pérignon to a stay to attend the Formula 1 Grand Prix in Brazil is typically in the situation to attract the eye of the taxman. In all cases, the accounting department of the company must keep track of these expenses, and establish the list of who received what. And he must also write on the detailed statement of general expenses if the expenses in business gifts exceed 3,000 Dollar.

What are the risks to which the company is exposed? If the administration considers that these largesses are totally disproportionate or do not allow the company to benefit directly, these sums will be reintegrated into the results of the company. And will therefore be subject to taxation. Recipients of gifts also have to fear. The tax authorities may ask them to include their amount in their income tax return. What to question the sound commercial relations.

Imagine your strategy

To fully exploit the economic potential of gift, it's best to start by setting your goal and target. 

Why do you want to offer good gifts (apart from developing your turnover)? To attract new prospects or to retain current customers (and encourage them to consume more)? To take advantage of a peak planned by the calendar or to fill a slack period? 

Depending on your objective, your strategy will be totally different: we do not put forward a gift voucher in the same place, or at the same time.