Taxation of Promotional Gifts – Simplified with Examples

What Is a Promotional Gift?

A promotional gift is a product or service given free of charge for advertising purposes – for example, a mug, notebook, pen, or backpack with a company logo that helps increase brand awareness and maintain relationships with clients or business partners.
A promotional gift is tax-free up to €21 in value (excluding VAT).
This rule applies to both VAT-registered and non-VAT-registered businesses.

How Are Promotional Gifts Taxed?

Value of the promotional gift (excluding VAT) VAT INCOME TAX
up to 10 € No VAT added No income tax
10,01–21 € 24% VAT applies No income tax
over 21 € 24% VAT applies Income tax applies (22/78)

Important Principles

Printing a Logo Does Not Increase the Gift Value

If a company logo is printed on the product, the cost of logo printing does not increase the gift’s taxable value for the recipient, and no income tax is calculated on that cost.

Example:
A company gives a mug with a logo.
The mug price (excluding VAT) is €19.87, and logo printing costs €1.68.
Although the total cost is €21.55, the value of the gift itself (€19.87) is still below the €21 threshold, so no income tax is payable.

The Threshold Applies Per Item or Per Set

If a single item is given, the €21 limit applies to that item.

If the gift consists of multiple items (for example a gift box containing a notebook, chocolate, and a mug), the values of all items are added together, and the threshold applies to the total value of the set.

Example:
Notebook (€8) + Chocolate (€6) + Mug (€10) = €24
Since the total exceeds €21, the entire gift becomes subject to income tax.

VAT depends on the value and the input VAT deduction.

If a company is VAT-registered and gives away goods worth more than €10, VAT must be calculated on the gift.

The taxable value is based on the product’s cost price or acquisition price.

Example:
Thermal mug price excluding VAT: €21.55
VAT = 24% × €21.55 = €5.17
Even though no income tax is due (gift value under €21), VAT must still be paid.

When a Promotional Gift Exceeds €21

If the gift value excluding VAT exceeds €21, then:
  • VAT must be paid
  • Income tax must also be paid (rate 22/78)
  • The gift must be declared on TSD Appendix 5
  • Logo printing costs remain business-related expenses and are not subject to income tax.
Example:
Thermal mug value €21.13, logo printing €1.68
Total = €22.81 excluding VAT → income tax is calculated on the full amount
VAT = 24% × €22.81 = €5.47

Shipping, Packaging, and Postal Costs

Costs for shipping, packaging, or mailing promotional gifts are not taxable because they do not increase the gift’s value to the recipient.

Input VAT from these invoices can be deducted normally.

Cut Flowers and Plants

Cut flowers given to business partners are considered a business expense and are not treated as taxable gifts – the €21 limit does not apply.

Potted plants qualify as tax-free promotional gifts if their value is up to €21 excluding VAT.

Main Rules for Taxation of Promotional Gifts

  • Tax-free up to €21 (excluding VAT)
  • VAT applies if the value exceeds €10 and input VAT was deducted
  • Income tax applies if the value exceeds €21
  • Logo printing does not increase the gift value.
  • The threshold is calculated per item or per gift set.
  • Shipping and packaging costs are not subject to tax.
A promotional gift is an effective way to promote your company and thank your partners. When tax rules are clearly followed, it remains a marketing activity rather than a tax risk.