HOW TO DEDUCT PROMOTIONAL ITEMS FOR TAX PURPOSES AND WHY THEY ARE ATTRACTIVE TO ALMOST EVERY BUSINESS

Promotional items like pens, mugs, or tote bags featuring your company logo are popular tools in the marketing mix. They enhance brand awareness, create a positive impression, and help keep your company in the minds of your customers. But promotional items are not only interesting from a marketing perspective; they can also be tax-deductible, making them doubly attractive for almost every business. In this article, we explain how this works and what you should consider.​

What Are Tax-Deductible Promotional Items?

Promotional items, also known as giveaways, are items used by a company for advertising purposes. These include, for example:​

• Pens, notepads, or USB sticks with your logo​

• T-shirts or caps with company branding​

• Promotional bags, tote bags, or shopping baskets​

• Higher-value gifts like calendars or bottles of wine​

  
  

As long as these items are clearly associated with your company and used for promotional purposes, they can be recorded as business expenses for tax purposes. The specific tax regulations depend on certain conditions, which we will explain below.​

What Conditions Apply for Tax Deductibility?

To deduct expenses for promotional items, certain criteria must be met:​

1. Clear Promotional Purpose: The items must be used to acquire or retain customers. This means they should be clearly linked to your business activities, such as through branding or logo placement.​

   
   

2. Avoidance of Luxury Gifts: High-priced gifts can be problematic. Promotional items are considered tax-deductible as "business expenses" as long as the individual value of an item does not exceed €35 net per recipient per year. Items above this threshold fall into a different tax category and are only deductible under strict conditions.​

   
   

3. Proper Documentation: Keep receipts, invoices, and, if applicable, records of the distribution of promotional items. These documents serve as proof that the expenses were business-related.​

   
   

How Does the Deduction Work in Practice?

The tax deduction for promotional items usually occurs during profit determination or the tax return process. The costs can be recorded as business expenses. The exact procedure depends on your business structure:​

• Sole Proprietors and Small Businesses: Enter the costs for promotional items in your income-expenditure statement.​

  
  

• Limited Liability Companies (GmbH) or Other Corporations: Here, the booking is done directly through the profit and loss statement. Consult your tax advisor if you are unsure about the correct booking method.​

  
  

Additional Tax Benefits:

1. Flat-Rate Tax by the Giver: Alternatively, you can opt for a flat-rate tax of 30% on promotional items. This is particularly practical when the €35 limit is exceeded. In this case, the recipient does not have to handle tax matters.​

   
   

2. VAT Refund: If you are entitled to deduct input tax, you can also claim the VAT paid on promotional items.​

   
   

Why Are Promotional Items Attractive to Every Business?

Beyond the tax advantages, there are numerous reasons why every business should consider using promotional items:​

• Cost-Effective Advertising: Small, practical items often remain in use for a long time, ensuring high visibility for your brand.​

  
  

• Emotional Connection: Well-designed promotional items create positive associations among customers and business partners, which can positively influence your customer relationships over time.​

  
  

• Versatile Applications: Whether at trade fairs, client visits, or as a thank-you for orders, promotional items are versatile and can be used in various contexts.​

Conclusion: Investing in Promotional Items Pays Off

Promotional items are more than just nice giveaways—they are a strategic marketing tool that simultaneously offers tax benefits. By ensuring that your promotional items meet the necessary criteria and maintaining proper documentation, you can effectively enhance your brand presence while optimizing your tax situation. It's worth investing in promotional items that resonate with your target audience and reflect your brand values.

Note: This article is for informational purposes only and does not constitute tax advice as defined by the German Tax Advisory Act. For individual tax inquiries, we recommend consulting a qualified tax advisor.