Is a business gift tax deductible in Belgium?

Up front: this article is general information, not tax advice. We know cake, not annual accounts. Put your own situation to your accountant or to a specialist such as Liantis.

You send a prospect something tangible, the invoice comes in and your accountant asks which account it belongs to. That is not a small question. In Belgium there are two treatments for this kind of spend, and for tax they differ a lot: the business gift (relatiegeschenk) and the advertising cost (publiciteitskost). This article sets out the difference calmly and then works it through with a cake of EUR 160.

The short answer

Yes, a business gift is tax deductible, but usually only for half. As a rule, business gifts are 50% deductible as a professional expense. VAT has its own threshold: if the gift itself costs EUR 50 excluding VAT or more, that VAT is not deductible. Ads, trade fair material and print work are 100% deductible under the ordinary rule for business expenses, which article 53, 8° of the Belgian income tax code never touches. For something you give away the road there is narrow: that article keeps out of the 50% rule only advertising items that conspicuously and lastingly carry the name of the giving company, and the administration adds a small value and a very wide distribution on top. The Dutch wording is opvallend en blijvend de benaming van de schenkende onderneming dragen; the code has no official English version, so the English here is our rendering. Lastingly is the word a cake runs aground on, because a cake gets eaten. A clear overview of those rules is available at Boekhouder123.

Business gift: half of it counts

A business gift (relatiegeschenk) is something you give to a business relation in order to maintain that relation. A bottle of wine for a client, a Christmas hamper for a supplier, a box of pralines after a finished project. What defines it is that nothing is given in return: the gift serves the goodwill.

For tax that means 50% of the cost is deductible and the other half is disallowed. And because a serious gift reaches that EUR 50 excluding VAT quite quickly, in practice you often lose the VAT as well. That non-deductible VAT then simply becomes part of the cost.

Advertising cost: all of it counts, if it really is advertising

Costs for advertising and promotion are fully deductible. Think of ads, trade fair material, print work and promotional items. Notice what those four have in common? They last. That is no accident. For a gift you hand over, article 53, 8° of the Belgian income tax code asks three things at once: the advertising item has to conspicuously and lastingly carry the name of the giving company. Conspicuous, lasting, and the name of the giver. The administration and the advisers add two more: the item has to be of small value and meant for very wide distribution, not reserved for a limited category of clients (circular no. 32 of 29 May 2017). Exactly where the line runs between a gift and promotional material remains a question of fact, but that word lasting is not a detail. That is precisely why this is worth a conversation with your accountant, not a decision you take on instinct.

Worked example: one cake of EUR 160, two treatments

We take the entry cake from ColdCake and work out both routes. First the assumptions, because without assumptions any worked example is misleading:

• You order one cake of EUR 160 (size M, round), including 6% VAT and including delivery in Flanders or Brussels.
• Excluding VAT that is EUR 150.94. The VAT comes to EUR 9.06.
• The cake goes to one contact person, who received nothing else from you this year.
• Your business is a company paying 25% corporate tax and making enough profit to set the cost against.
• You are VAT registered with a full right to deduct, and we round to the cent.

The difference per cake: EUR 26.80. That is what separates the two categories, not what you get to choose. Anyone running a campaign, First Oven with five cakes a month for example, puts that difference on the bill five times. So plan with the left-hand column and put the question to your accountant once, up front, instead of having it corrected afterwards.

Three details that often get forgotten

• The threshold of EUR 50 excluding VAT applies per gift: if the gift itself costs EUR 50 excluding VAT or more, that VAT is not deductible (SBB, 7 July 2020).
• Give several gifts to the same relation in one calendar year and the tax authorities accept the VAT deduction on only one of them (circular no. 32 of 29 May 2017). Spreading it over smaller gifts does not save the VAT by itself.
• The 50% rule is about the deduction as a professional expense. VAT deduction is a separate assessment with its own threshold; they are two different questions.
• A spend does not become an advertising cost because you write that word on the invoice. The nature of the spend decides the treatment, and you have to be able to show it.

So where does a cake fall?

Two of the five conditions are fine. A ColdCake is not an anonymous gift with a ribbon: your design and your brand sit in edible ink on the cake itself, with a QR code next to them. Whoever scans it sees the cake come to life in AR and lands on a personal page that shows who the cake is from, with your message if you wrote one and your own button if you added a link. Conspicuous it certainly is, and your name is the one on it, so you are the giving company. What that looks like in practice is on How it works.

The other three are the hard ones, and we are not going to dodge them. Lasting is not something a cake manages, because it gets eaten, and advisers file consumables such as wine, chocolate and champagne under business gifts for exactly that reason. Small value EUR 160 is not either. And a cake that goes to one carefully chosen contact is the opposite of the very wide distribution the administration asks for. So work on the assumption that you land in the 50% column, and let your accountant judge whether your file sits differently.

For VAT there is a separate road he can weigh, the trade sample. Circular no. 32 of 29 May 2017 asks three things at once: you hand it out for advertising reasons, the cost is accepted as a business expense for direct taxes, and the sample is of the same kind as what you make or sell yourself. Clear that and the VAT stays deductible and the EUR 50 threshold does not apply. It is a VAT rule, and it changes nothing about the 50% on the income tax side. If you do not sell pastry yourself, that road probably does not fit you. We give no guarantees here, and anyone who does so without knowing your file deserves a raised eyebrow.

And what does that QR code do?

For the bookkeeping the QR code is a detail, for the recipient it is not. When they scan the code with their phone, AR (augmented reality) opens: an image laid over what the camera sees, so the cake comes to life on the screen with the sender’s video, and no app is needed. If you ask, we will tell you whether your cake was scanned, and none of this changes the 50% column. Read on: how the scan works for the recipient.

What your accountant likes to see

To have that conversation properly, keep this to hand:

• The invoice, with date and amount.
• Who received the cake and why: which company, which campaign, which commercial goal.
• A photo of the cake, so it is visible that your name and your brand are on it.

Practical questions about sizes, flavours and delivery are in our FAQ. Anything else can go to info@coldcake.be.

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Again, for the fast scrollers: this is not tax advice. Percentages and thresholds can change and your situation may differ. Consult your accountant or a specialist such as Liantis before you base decisions on this.