Tax deduction for advertising material

The deductibility of advertising for companies extends to all expenses, regardless of whether they arise from advertising to customers, business partners or employees. The most important basis is a proper invoice to the own company. If this has been issued, the entrepreneur can deduct the advertising material as a business expense for tax purposes. The costs are considered a profit-reducing expense immediately at the time of payment, regardless of the amount.

§Section 37b of the German Income Tax Act (EStG) governs tax deductibility. Promotional items are generally deductible as advertising expenses. But which value limits must be observed, which lump sums must be declared? From what amount onwards must proof of receipt be provided? We have the answer to these questions. Please contact us.

Promotional items must be examined from three perspectives with regard to tax deductibility: (1) From the perspective of the one who receives them; (2) From the perspective of the one who distributes them; and (3) From the perspective of the one who manufactures or trades them.

The tax office recognizes expenditures for promotional items as advertising costs and allows limited tax deductibility. Various questions arise for all parties involved with regard to the tax issue, from the fact that promotional items can be of both low and considerable value.

The “donee” (1) must ask himself whether this promotional gift is considered to be hidden income. The “donee” (2) must determine whether he or she can claim the full cost, whether he or she may need to provide proof of receipt, and whether it may be worthwhile to apply a flat rate of taxation to the recipient of the promotional item. The manufacturer or seller (3) of promotional items must be able to provide his customer with information on how the tax office will classify the planned promotional items.

The wooed customer (1) rarely receives a clear indication in the case of a “promotional gift” that he may have to consider the gift as income and declare it in his tax return. This is already given from a net value of 10 euros. The pharmaceutical industry has, in order to exclude here any Vorteilnahme, this value in a self obligation even on 5 euro fixed. However, in order to circumvent this problem, the “gift-giver” (2) can pay a flat-rate tax of 30 percent to the tax office for all promotional gifts and other benefits in a year and exempt the customer from this.

For the “advertiser”, promotional gifts are only tax-deductible up to a net amount of 50 euros – per customer and per year. For advertisers who distribute such give-aways, the promotional products constitute “business gifts for advertising purposes” and are subject to certain record-keeping requirements. For accounting purposes, they must be listed in a special account showing who exactly has received these promotional products (proof of recipient). Errors or inconsistencies reduce the chance of recognition of deductibility. The diligence of the record-keeping requirement decreases with the value of the promotional gift. But where it begins varies depending on the tax office, and must be inquired about.

Do you have questions about the tax deductibility of your promotional items?

Contact us – we will be happy to advise you at 02567-961261 or write us an email to


The way of accounting presentation also becomes important. The expensive advertising product, which almost reaches the 50-euro limit, should be listed separately. All ancillary costs – for example, the creation of prototypes of advertising materials – should be shown separately on a second list.