Lesson 5. Promotional Gifts (Use Case)
Use Case
The company decided to order promotional gifts for the clients. Beautiful coffee cups will cost the company 8 euros and 3 euros will be the price to put the logo on.
From the point of an Income-tax view, the application of the logo does not increase the value of the gift for the recipient, which is still 8 euros.
The application of the logo to the cup does not increase the value of the cup by itself. That being said, the cost of applying the logo to the cup can be considered separately, as a tax-free advertising cost.
Under the Value-Added Tax Act, assessment is carried out not from the perspective of the recipient, but from the point of the entire acquisition cost of the goods and services given free of charge. Which in our example exceeded the 10-euro tax-free limit, and because of this reason, we should apply and pay Value-Added Tax on 11 euros.
To sum up, based on the examples above we can conclude that the company will not pay Income but should pay Value-Added Tax.
Sources:
https://www.riigiteataja.ee/en/eli/530012014003/
https://www.riigiteataja.ee/en/eli/527022014003/
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