At this time of year, when you are planning events, thinking about ways to say thanks, spread some festive cheer with clients or celebrating special milestones, questions around gifts often come up.

If you provide a gift to a client, depending on the type of gift, you may be able to claim a tax deduction. It may be completely deductible or only 50% deductible.

If the gift is in the nature of “entertainment”, such as food and wine, it will be 50% deductible.

If gift baskets or hampers contain food or drink as well as other treats, the food or drink items are 50% deductible, but the other gift items are 100% deductible. Likewise, if gift vouchers provided are only redeemable for food and/or drink then the cost of the vouchers is 50% deductible.

Keep these examples handy to help determine whether gifts to clients are completely deductible or only 50% deductible:

When you claim tax deductions for client gifts, you need to apportion the expense between the 100% deductible items and the 50% deductible items.

Please get in touch with us if you require further assistance or have any questions.

* Even though the costs of a party held overseas for employees are not subject to an entertainment expense limitation (i.e. they are 100% deductible), the expenditure will be subject to FBT as the expense is incurred outside New Zealand.

** Gift vouchers provided to clients which are not limited to food and drink, i.e. “Prezzy cards” or general merchandise stores are 100% deductible.