Christmas gifts: Suspected bribery
Giving gifts is popular among business partners. With this casual gesture, you can establish mutual respect and communicate that you are happy with the cooperation to date. These days that is considered absolutely normal and not suspect. This is true as long as it is done within the bounds of the law.
Things will look different if a present is affiliated with certain retributions by the recipient, such as the placement of an order. Businesses that give gifts will have to absolutely avert such suspicions of bribery. To make sure that there is no reason for concerns when it comes to gifts for you and your business partners, you should stipulate transparent compliance rules.
You may, for instance, limit the value of gifts in employment contracts and business agreements stipulating up to which value employees may accept gifts. If a gift is obviously more expensive, the next steps will have to be subjected to clear regulations. This may mean that the receipt has to be reported and the affected gift may have to be returned. By the way, this rule should apply to all gifts, not just Christmas gifts from business partners.
One alternative to give instead of presents that does not raise suspicions is the making of donations for the common good. In this case, businesses can use their "Christmas budget" to fund projects they choose at their discretion. Of course you should notify your business partners of such activities. Vice versa, you may ask for donations for certain non-profits in lieu of gifts as well.
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Proper tax law compliant handling
Christmas gifts for business partners can be used as tax deductions under certain circumstances. This refers to presents that do not exceed the value of EUR 35. This rule applies for each person (including legal entities, such as enterprises) and year. However, if the added total exceeds EUR 35, the entire gift will not be deductible. This also applies to advance tax deductions.
Exemption from the EUR 35 rule: the recipients use the more expensive gift for business purposes. This could, for instance, be a pricey tool for a craftsman. To avert potential future problems with the IRS, the givers should not only keep the receipt as evidence, but also take a picture of the gift.
Business partners who receive the gift, will have to post it as follows:
For personal use: first as operational income and then as a personal withdrawal.
For business use: as both, operational income and an operational expense.
However, to allow the recipient to avoid these complications, an option for lump sum tax reporting is available. This means: The giver pays taxes for the value of the present (if applicable, plus the solidarity surcharge and church tax) at a lump sum rate of 30 percent pursuant to Art. 37b Income Tax Act (EStG). In this case the recipient who has been notified will not have to record the gift as an operating expense. This option is available for each person and year for a value of up to EUR 10,000.
In addition to the already listed most important aspects, other details have to be complied with regard to the taxation of business partners for Christmas gifts. This is why companies should get the facts and information ahead of time.
Christmas gifts for business partners: ideas that will be well received
Whether it's for Christmas or other occasions – gifts to business partners will be particularly well received if they ...
- are practical
- surprising and/or
- custom tailored.
Ideally, they will deepen business relationships. The material value of the gifts is irrelevant. It is more important to know the (personal) preferences of the recipient and to embrace them. For instance, if someone likes to go fishing, they will probably appreciate a set of hooks. Fans of musicals will probably like tickets. And sometimes it suffices to just send a personally addressed Christmas card to maintain good customer relations.