With the holiday season approaching, many businesses and professionals prepare to distribute gifts to clients and employees. Circular No. 26/2025 from Studio RCG provides a comprehensive overview of the tax regime applicable to business gifts, highlighting changes introduced from 2025, particularly the mandatory traceable payment requirement to ensure expense deductibility.
2025 Update: traceable payment obligation. From 2025, expenses for client gifts are deductible only if paid through traceable methods such as credit/debit cards, bank transfers, or payment apps like Satispay or PayPal. For professionals, this obligation applies to expenses incurred from June 18, 2025.
Client gifts – Income tax and IRAP. Gifts with a unit value up to 50 euros are fully deductible if paid through traceable methods. If the value exceeds 50 euros, they fall under representation expenses and are deductible within percentage limits: 1.5% of revenues up to 10 million euros, 0.6% for the portion between 10 and 50 million, 0.4% above 50 million. For self-produced goods, market value determines whether they qualify as representation expenses, but the actual production cost applies for calculating the deduction cap.
Employee gifts – Income tax. The cost of employee gifts is deductible under employment cost rules. For employees, gifts received in 2025 are tax-exempt within the limit of 1,000 euros (2,000 euros for those with dependent children), together with other fringe benefits including amounts for household utilities, rent, or mortgage interest on the main residence.
Flat-rate and minimum taxpayer regimes. Under the flat-rate regime, gift expenses are not relevant for income determination, as taxable income is calculated by applying the profitability coefficient to received revenues. For minimum taxpayers, gifts up to 50 euros are fully deductible, while those exceeding this value follow representation expense limits.
VAT on gifts. Free transfers of goods related to business activities are subject to VAT and must be documented with electronic self-invoicing (code TD27) or a gift register. VAT not charged as pass-through is non-deductible. Free samples of modest value permanently marked are VAT-exempt. For goods not related to business activities, free transfer is VAT-exempt and input VAT is deductible only if unit value does not exceed 50 euros. Employee gifts are VAT-exempt and purchase-related tax is non-deductible, unless they are goods related to business activities.
Gift vouchers. Vouchers are distinguished into single-purpose, where the VAT transaction is considered completed upon issuance, and multi-purpose, taxed only upon redemption. For direct tax purposes, vouchers given to clients follow representation expense treatment, while those granted to employees constitute fringe benefits with deductible costs for the company.
Studio RCG remains available for any clarification regarding proper tax management of business gifts.