Giving gifts at the beginning of the year is a very common practice in business life. Their purpose is to maintain harmonious relations with your customers, in the interests of the smooth running of your business. To remain within the law and benefit from all the tax exemptions available to you, you need to comply with a number of conditions and rules, both legal and fiscal.
What are the characteristics of a customer gift?
You should bear in mind that a gift made to your customers must be of low value, as specified in 3° of 2 of IV of article 206 of appendix II to the General Tax Code. The maximum value is set by a decree issued by the minister responsible for the budget.
Most of the time, these are gifts or invitations that serve to thank your loyal customers, show them your appreciation, but also enhance your image. It could be a bottle of alcohol with a personalized label, a box of chocolates, tickets to a show, but also goodies that can be offered in all price ranges, allowing you to combine New Year's gifts with advertising. What's important is that every customer feels that you're interested in them as a person, and that you know their tastes. That's how you get the most out of a New Year's gift for your customers.
Gifts to a customer: the legal rules to follow
New Year's gifts, as well as gifts for other occasions, must comply with three conditions:
- They must be made in the context of a well-established commercial relationship.
- They must be disinterested, i.e. their aim must not be to turn a prospect into a customer or win a government contract.
- Their value must be consistent with your business sector.
You also need to keep an eye on the frequency of gifts, because if they're too repetitive, they can end up being an unfounded benefit.
If the gift does not meet these three criteria, it may be considered an attempt at bribery. The French Anti-Corruption Agency (AFA) has drawn up recommendations to help companies and public bodies select the gifts they give to their customers. Failure to comply with these recommendations constitutes active bribery (on the part of the giver) and passive bribery (on the part of the receiver), and is punishable by heavy fines and possible imprisonment. These penalties are doubled if the bribe-taker is a public official.
Gifts to customers: tax rules to be observed
Deduction from taxable profit
Provided your gifts do not contravene any legal or regulatory provisions, and their value is not disproportionate, it is possible to deduct the sum of €3,000 for all the gifts you give to your customers.
Good to know: if the amount exceeds €3,000, you must complete a declaration and attach it to your income tax return:
- Companies must declare the amount on the general expenses statement (form no. 2067-D).
- Sole traders are required to complete box F of the n° 2031 declaration.
One point not to be overlooked: if your company is the subject of a tax audit, you should be aware that you will have to provide proof of the consistency of the expenses you incurred in the course of your business relations with the customers who received these gifts. That's why you need to keep all invoices, and make sure they mention the names of the recipients.
VAT recovery
By law, VAT cannot be deducted on donated goods, even if the transaction is in the company's interest.
However, VAT is recoverable on gifts whose unit value does not exceed a certain amount (currently €73 incl. VAT per recipient). This amount is linked to the variation in the monthly consumer price index excluding tobacco for all households. Gifts worth more than this amount are not eligible for VAT recovery.