Tax implications of gifts to customers

A company may promote its sales by giving products or gifts to customers on certain occasions. In such cases, the company should consider the VAT implications of gifts given to customers, which are summarized.

Keywords: Mazars, Thailand, Tax, VAT, Revenue Department

6 September 2022

1. Output VAT

The Revenue Department provides guidelines on gifts given to customers in the Notification of the Director-General of the Revenue Department regarding VAT No. 40 (“the Notification”). 

Normally, gifts to customers are considered goods sold, which are subject to VAT. However, under Clause 2(6) of the Notification, the value of goods distributed or given away as gifts in certain situations do not have to be included in the VAT computation. The value of gifts given to customers does not have to be included in the VAT computation if:

  • the gifts are given in a ceremony or on occasions in accordance with established customs such as New Year’s, an opening ceremony for a company, office, or showroom, or the introduction of new products;
  • the name, trade name, or trademark of the company is permanently affixed (such as printed or spray-painted on) to the gift;
  • the gifts are articles that are usually given in general business practice, such as calendars, diaries, glasses, keychains, pens, or goods of a similar nature; and
  • the price or value of the gifts is “reasonable”. However, the Notification does not define the term “reasonable”.

2. Input VAT

If the gifts given by a company to its customers comply with the guidelines set out in the Notification, VAT from the purchase of such gifts is claimable. 

However, if a gift or fruit basket is given to a customer with a business card attached to the basket, the VAT from the purchase of such a gift or fruit basket is considered input VAT arising from entertainment expenses. In this case, the input VAT cannot be claimed under Section 82/5(4) of the Revenue Code. However, the cost of the gift or fruit basket, along with its VAT, can be deducted as an entertainment expense for corporate income tax purposes, provided that the following conditions under Ministerial Regulation No. 143 of the Revenue Code are met:

  • The entertainment expense is necessary in general business practice.
  • The person entertained is not an employee, unless employees are obligated by their duties to participate in the entertainment (i.e., the person entertained must be a client).
  • The entertainment expense is beneficial to the business.
  • The cost of articles given to those entertained does not exceed THB 2,000 per person on each occasion.
  • The entertainment expense does not exceed 0.3% of the amount of gross taxable income or sales or the amount of paid-up capital as at the end of the accounting period, whichever is greater. However, total entertainment expenses deducted must not exceed THB 10 million.
  • The entertainment expense is approved or authorized by a director, partner, or manager, or one of their delegates.
  • There is evidence of the entertainment expense in the form of receipts or similar documents issued by the recipient.