Gifts to business partners not only keep the compliance officer on their toes, accounting often finds these kinds of representation costs exhausting. A company has to consider a lot here in order to save the tax deduction. Gifts to customers and suppliers are generally not considered business expenses , unless the value of the gifts (excluding sales tax ) does not exceed 35 euros per year.
On the other hand, employers can be more generous towards their employees. Regular gifts in the form of benefits in kind, including vouchers for goods and services, are exempt from income tax provided that their value does not exceed EUR 44 per month (Section 8 (2) sentence 9 EStG). Since 2019, the Ministry of Finance has also made its own personal contribution to climate protection and allows job tickets and other tickets for local public transport to be granted or reimbursed free of income tax (Section 3 No. 15 EStG) as well as the provision of company bicycles (Section 3 No. 37 EStG) – even an e-bike is in it, but a moped no longer!
On special occasions such as birthdays, weddings or service anniversaries, the boss may give a present in addition to the benefits in kind mentioned above. In this case, gifts remain free of income tax up to an amount of 60 euros per occasion . Employers who think this is too stingy also have the option of the above-mentioned flat-rate taxation in accordance with Section 37b of the Income Tax Act. In general, the delimitation is more precise and the sales tax is also levied differently depending on the type of costs.
Advertising expenses and advertising expenses
These two very similar terms denote fundamentally different situations. Business expenses are the pedant to business expenses on the employee side. In other words, the expenses that they spend to generate income from work and which they are therefore allowed to deduct from taxable income. Under certain conditions, the representation costs of employees can increasequalify as deductible business expenses. This applies in particular when an employee celebrates a special birthday or an anniversary in the company and invites only or at least predominantly superiors and colleagues. Here, too, only the champagne corks and not the champagne corks are allowed to pop, but if the entertainment costs are within the socially acceptable range, they reduce the employee’s taxable income in full (not just 70 percent).
We owe this knowledge to a tax officer, of all people, who celebrated a service anniversary and then claimed the expenses as part of his income tax . His employer was not enthusiastic, but the brave officer was not intimidated and complained through all instances to the BFH, which finally agreed with him (BFH, judgment of January 20, 2016, VI R 24/15).
What is the difference between advertising costs and entertainment costs?
Advertising costs are expenses that companies make to promote the sale and distribution of their goods and services. These include, for example, advertisements in newspapers and on the Internet, radio and cinema spots, posters and brochures, showrooms and stands at trade fairs and exhibitions. Although these advertising measures also serve to present the company to the outside world, these are not representation costs in the narrower sense. Distribution costs of this type do not fall within the scope of Section 4 (5) sentence 1 of the Income Tax Act. However, there are always delimitation difficulties. So-called “giveaways” , i.e. small items such as pens, calendars or mugs with the company logo, are regularly used as advertising material that is fully deductible as business expenses.
A resourceful south-west German tax office was of the opinion that calendars with the company logo, which are sent personally to certain recipients, are gifts. It was also able to convince the local tax court of this opinion (FG Baden-Württemberg, judgment of April 12, 2016, 6 K 2005/11). The BFH has the last word on the matter. The assessment had far-reaching consequences for the company concerned, which went into the revision, even though the calendars were worth significantly less than the permitted 35 euros. The reason for this was the accounting entry, special regulations apply here for certain representation costs.
How are entertainment expenses booked?
Even professionals don’t like to book representation costs. In the above case, the company’s undoing was the fact that it had shown the calendar on a collective account. For gifts and the other examples of entertainment costs mentioned above, special provisions apply to accounting records in accordance with Section 4 (7) of the Income Tax Act . Expenses within the meaning of Section 4, Paragraph 5, Clause 1, No. 1 to 4, 6b and 7 must be recorded individually and separately from other operating expenses and, unless tax deduction is generally prohibited, may only be taken into account when determining profits if these recording obligations are met.
You have to set up a separate account in your accounting for each of the categories mentioned and you are only allowed to record these expenses there.
Representation costs in SKR 03 and SKR 04
If you are using a Datev standard chart of accounts , you will find the group 4600 advertising costs in SKR 03. Individual accounts are already provided for the relevant categories. If necessary, sub-accounts have to be set up. When posting, it should be noted that the input tax may only be deducted from the part of the operating expenses that reduces the profit.
Entrepreneur Maria Müller gives a particularly good customer a bottle of wine worth 100 euros plus 19 euros VAT , which was paid in cash on delivery. The customer did not receive any other gifts in the fiscal year. In SKR 3, the booking record would then be as follows:
|Account name||amount||Have an account||Account name||amount|
|4630||Deductible gifts||35.00||1010||Cash desk 1||119|
|4635||Gifts are not deductible||77.35|
|1576||Input tax 19%||6.65|
The representation costs in SKR 04 can be found in group 6600, the booking takes place analogously.
Representation costs are expenses and reduce the result in the annual financial statements under commercial law , even if they may not be taken into account in the tax balance sheet. Something different only applies to the representation costs, which are attributable to the private sphere, i.e. the ball gown or the new haircut. If these expenditures were made with operational funds, this is booked as a private withdrawal.