Italy: The Tax Regimen For Corporate Gifts - Income Tax, Regional Tax (IRAP) And VAT

Last Updated: 20 December 2011
Article by Batini Colombo Saottinis' Tax Team

The Tax Regimen For Corporate Gifts - Income Tax, Regional Tax (Irap) And Vat

SUMMARY

1 Introduction

2 Income Tax and Local Tax (IRAP)

2.1 Corporate gifts to Clients

2.2 Corporate gifts to employees

2.3 IRAP (Regional Tax)

2.3.1 Gifts to Clients

2.3.2 Gifts to employees

2.4 Artists and Professionals

2.4.1 Gifts to Clients

2.4.2 Gifts to employees

3 VAT

3.1 Gifts of goods produced by the enterpri

3.1.1 Coveyance's documentation

3.1.2 Free samples

3.2 Gifts of goods not produced by the enterprise

3.3 Gifts to employees

4 Gifts made by "purchase's vouchers"

1 INTRODUCTION

The awareness of gifts by enterprises and professionals represents an usual habit, particularly under festivities and anniversaries.

Here below we summarize the most important aspects of the tax regimen of those transfers within the area of income, regional taxes and VAT.

2 INCOME AND REGIONAL TAXES

Costs suffered for gifts' distribution can assume a different income nature if goods are delivered to:

  • clients;
  • employees or workers assimilated to employees.

2.1 GIFTS TO EMPLOYEES

In general, costs suffered for gifts delivered to clients are deductible:

  • entirely, if the unitary value of gifted goods addressed to a single subject doesn't exceed Euro 50,00 (limit increased by the Financial Law for 2008 starting from the fiscal year following the one ending on December 31st 2007; until that date the limit was fixed at Euro 25,82).
  • within the year in which costs are suffered under the limits foreseen by the Ministry Decree dated November 19th 2008, if the value of the gift exceed Euro 50,00 or substitutive vouchers are distributed (since they are considered representation expenses).

In order to determine the "unitary value" of the delivered gift, the following rules must be respected:

  • the gift must be evaluated in its whole (i.e. Christmas Box), and not with reference to single items included in the gift;
  • the purchasing cost includes accessorize costs (transportations, un-deductible VAT, etc.).

In particular, considering that VAT is not deductible just for gifts with a unitary value exceeding Euro 25,82, the amount paid for gifts is totally deductible only if the amount taxable for VAT is:

  • 48,08 euro, if VAT rate is 4%;
  • 45,45 euro, if VAT rate is 10%;
  • 41,67 euro, if VAT rate is 20%;
  • 41,32 euro, if VAT rate is 21%.

2.2 GIFTS TO EMPLOYEES

In general, the cost suffered by the employer to purchase goods to be gifted to employees is deductible from corporate income according to the rules applicable to employment's costs.

2.3 REGIONAL TAX (IRAP)

The financial law for year 2008 has repealed the rule under which revenues and costs that concur to form the Regional Taxable Income have to be considered adding or subtracting taxable income or non deductible costs has happens for income taxes.

Although the Tax Authority has several times clarified that the general principle to be considered is the absolute connection with corporate activity (really difficult to demonstrate for all types of gifts).

2.3.1 Gifts to Clients

With reference to the calculation of taxable income for Regional Tax (IRAP) for Share Capital Companies, corporate gifts are deductible for the amount accrued in the P&L.

While for Unlimited Liability Companies and individual entrepreneurs, corporate gifts are not deductible for Regional Tax (IRAP). According to Tax Return's form instructions, the nondeductibility is limited to gifts' values exceeding Euro 50,00.

2.3.2 Gifts to employees

With reference to the calculation of taxable income of Regional Tax (IRAP) for Share Capital Companies, corporate gifts are:

  • deductible, if are functional to the corporate activity and are don't have a remunerative nature for the employee;
  • non-deductible, if they are included in employment expenses ad are salary for the employee.

For Unlimited Liability Companies gifts to employees are non-deductible for Regional Tax (IRAP).

2.4 ARTISTS AND PROFESSIONALS

2.4.1 Gifts to Clients

They are deductible as representation costs within the limit of 1% of revenues generated during the fiscal year. The same treatment is applicable for Regional Tax (IRAP).

2.4.2 Gifts to employees

The cost suffered by professionals for gifts to be delivered to employees is not specifically ruled.

These costs should be totally deductible as all other expenses related to employees suffered by the professional, since they can't be classified as representation expenses under the definition provided by the Ministry Decree dated November 19th 2008 (applicable even to self-employment income).

For Regional Tax those costs are non-deductible costs, as all other employment expenses, saved the case when those gifts become taxable income for the employee.

3 VAT

The free exchange of goods delivered to Clients follows the general rules provided by VAT law, with the exemption of those goods not produced directly by the enterprise, without regards to its previous deduction, that depends on the unitary cost of goods gifted (over or under Euro 25,82).

3.1 GOODS PRODUCED BY THE ENTERPRISE

Purchases of goods intended to be gifted, produced directly by the enterprise, are not considered representation's expenses. Therefore VAT paid to the supplier is entirely deductible.

In order to determine the taxable amount, the value to be considered is the purchase's price and not the market value.

3.1.1 Conveyance's documentation

VAT payment's requirement to the gifted subject is not compulsory for gifts.

If no compensation is applied, the exchange can be certified alternatively:

  • issuing a self invoice, including the purchase price, the VAT rate applicable, the VAT charged and specifying that it is a "self-invoice for corporate gifts". This document, that must be entered in VAT Book, can be issued once a month for all gifts delivered or one for each gift.
  • Recording all gifts in a specific "Gifts Book" all purchases' prices of goods gifted, for every single day and divided according to the applicable VAT rate.

VAT not charged to the gifted subject is not deductible from corporate income tax.

3.1.2 Free samples

Free samples' sales are VAT exempted if they are:

  • Of a non relevant value;
  • Duly and permanent countersigned;
  • Gifted to promote the good and in order to improve their knowledge among consumers, present and potential.

3.2 GOODS NOT PRODUCED BY THE ENTERPRISE

Goods purchased and not directly produced or commercialized by the enterprise and gifted, are always considered representation expenses, despite the unitary cost of the same.

Their donation is always considered VAT exempted. VAT on representation expenses, instead, is deductible only if their unitary cost is not higher than Euro 25,82.

Therefore VAT on those purchases is:

  • deductible, if the unitary cost of the good gifted is not higher than Euro 25,82;
  • not deductible if the unitary cost of the good gifted is higher than Euro 25,82.

3.3 GIFTS TO EMPLOYEES

Goods purchased to be gifted to employees, are always considered not pertaining the corporate business and can't neither been qualified as representation expenses; therefore the connected VAT is never deductible, while their gift is VAT exempted.

If gifts are represented by goods produced or commercialized by the enterprise, VAT is deductible and their gift is VAT taxable.

4 GIFTS MADE BY PURCHASE VOUCHERS

It is a consolidated habit to gift the so called "purchase vouchers", that allow to purchase goods and services in affiliated shops and providers.

The Italian Tax Agency has analysed this matter only regarding VAT aspects, without giving any clarification on their direct taxation treatment. We can consider the case where a company organizes, for its Clients, a supplying service of goods or services issuing vouchers that can be used only in affiliated shops by vouchers' owners.

The operation can be divided into four different relationships:

  • relationship between the issuing company and affiliated shops, ruled by a supplying agreement, with whom the affiliate grants the supplying of specific goods and/or services;
  • relationship between the issuing company and Client company, characterized by the sale of vouchers for a certain price including VAT;
  • relationship between the Client company and the final user, characterised by the free distribution of vouchers to final
  • beneficiaries, who can use the same among the affiliated net of providers;
  • relationship between the final users and affiliates, characterised by the delivery of those vouchers to obtain the good or service chosen.

According to the Italian Tax Agency, vouchers can't be considered as titles representing goods, but documents legitimating subjects that allow the identification of subjects entitled to purchase the good or the service.

The above mentioned qualification of vouchers as simple legitimating documents implies the exemption from VAT of relationships between:

  • the issuing company and affiliated shops;
  • the issuing company and the Client company;
  • the Client company and the final user.

In all three relationships, in fact, vouchers' circulation doesn't form a goods' or services' exchange, but just a mere financial movement.

On the contrary the relationship between the affiliated shops and the final users, even if the price paid is partially all whole absorbed by the vouchers' value, is always VAT taxable.

Therefore the affiliated shops has to deliver an invoice or a fiscal receipt charging VAT on the entire price of the good or the service, even if partially or totally paid with a voucher.

Direct taxation treatment

On the other hand vouchers' direct taxation is still not clear.

In case their qualification as simple legitimating documents operate also for income taxes, vouchers' purchasing cost seems to be not deductible, since they are not included in the definition of representation costs under the Ministry Decree dated November 19th 2008.

If, otherwise, they could be represent the purchased good, no doubts should rise about their deductibility.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Batini Colombo Saottinis' Tax Team
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions