Promotional items

What it means

Promotional items are small articles bearing a company’s logo or business name that it gives away to customers and partners, such as pens, bags, calendars, mugs or USB sticks. Their purpose is to promote the company, not to reward a particular person.

Under the Income Tax Act, promotional items are a tax-deductible expense if their value per item does not exceed a statutory limit and they carry the company’s business name or trademark. More expensive gifts are treated as entertainment expenses, which are generally a non-deductible expense.

For VAT, handing over an item free of charge where input VAT was deducted is treated as a supply of goods for consideration. Gifts of small value are an exception, and no VAT is due on them. The income tax and VAT thresholds must be tracked separately.

How it works in practice

When buying promotional items we recommend that the invoice shows the number of items and the unit price and that the documents make clear the items carry the logo. In an audit it is then easy to show that they are advertising and not gifts.

We keep at least a summary record of distribution, for example at a trade fair or during a campaign. For more expensive items given to specific clients, a list of recipients helps assess whether they are really entertainment.

Promotional items are part of marketing, and we compare them with other forms of promotion such as content marketing or sponsorship. Each is treated differently for tax, so before a larger campaign we advise on how to set it up.

What to watch out for

If a company gives employees branded gifts, they are not promotional items but a non-cash benefit. The employee is taxed on it as wages unless a specific exemption applies, such as a contribution from the social fund.

Expensive items split across several cheaper invoices, or gift baskets labelled as advertising, will not stand up in an audit. The tax office looks at the real value and purpose, not the wording on the invoice, and will disallow the expense retroactively.