Business gifts in Luxembourg: VAT, deduction and bookkeeping

In short. In Luxembourg, a gift given to a client is in principle a deductible operating expense, as long as it serves the business and is documented. On the VAT side, giving a good away for free in principle triggers a taxable deemed supply, except for low-value gifts and samples, which article 13 of the VAT law excludes. One key point: the law sets no euro threshold for "low value", unlike France. The French threshold does not apply here.

November is here, and with it the question Luxembourg SME owners ask every year-end: "this client gift, can I put it through as an expense, and do I reclaim the VAT?" The answer is yes, often, but under precise conditions, and most pages on the topic copy French rules that do not apply in Luxembourg. Here is the Luxembourg treatment, from official sources: the income-tax deduction, reclaiming VAT, the low-value gift, and the special case of a gift given to an employee.

Deducting a client gift from the company's tax

A gift given to a client is deductible from taxable profit when it is an operating expense, that is, an expense incurred in the interest of the business. A hamper sent to a loyal client, a bottle handed over after a signature, an item carrying your brand: as long as the business link is real and documented, the cost reduces taxable profit, just like a business meal or a work trip.

The limit comes down to one word: liberality. A gift with no consideration and no business link, given out of pure generosity, falls into gifts and donations, which article 168 of the income tax law expressly excludes from deductible expenses. The dividing line is the evidence. A receipt stating the date, the recipient and the business reason turns a fragile expense into a defensible charge. We set out this mechanism, and the list of charges the law rules out, in our article on deductible company expenses in Luxembourg.

Bear in mind too: deductible does not mean free. Putting a gift through as an expense reduces tax by the tax rate, around 24% for a company based in Luxembourg City, not by the full amount spent. The gift stays a commercial choice, not a tax trick.

VAT on gifts: the deemed-supply rule

This is the most misunderstood point, because the reflex is to apply what you read elsewhere. In Luxembourg, when a company takes a good from its stock to give it away for free, the transaction is in principle treated as a supply for consideration: this is the deemed supply set out in article 13 of the amended law of 12 February 1979 on VAT. In other words, giving a good away can require you to account for VAT as if you had sold it.

But article 13 itself sets out the exception that matters for business gifts. The deemed supply does not apply where it is made, for the needs of the business, "to give low-value gifts and commercial samples". In practice, a low-value gift handed over in a business context triggers no VAT to account for, and the VAT you paid on purchase stays deductible. Commercial samples follow the same logic. The text adds a useful consistency: the deemed-supply rule also does not apply where the VAT on the good could not be deducted in the first place, since there is then nothing to neutralise.

"Low value": no euro threshold in Luxembourg

Here is the point most French-language sources get wrong. In France, a precise ceiling in euros including VAT, per year and per recipient, frames business gifts. That ceiling is French. The Luxembourg VAT law speaks of "low-value gifts" without setting any figure in the text. Importing the French number into Luxembourg means applying a rule that does not exist here.

In practice, assessing what stays "low value" is a matter of common sense and of the tax authorities: a promotional item, a bottle, a modest hamper given occasionally to a client stay within the spirit of the text. A high-value gift, by contrast, falls outside the exception: the deemed supply applies, and the corresponding VAT must be accounted for. Where you are unsure about an unusually valuable gift, it is better to settle it with your accounting firm before giving it than at the time of an audit. This is exactly the kind of grey area where a dated answer beats a guess.

And gifts given to your employees?

A gift to staff follows a different logic from a client gift, and this is a common year-end mix-up. A gift or gift voucher given to an employee is, in principle, a benefit in kind: it is added to taxable pay and enters the social-contribution base, unless it falls under an administrative tolerance for occasional gifts tied to a specific event.

Let us be straight, because this is where sources contradict each other most: the exact amount of this tolerance for ordinary gift vouchers is not fixed by a single figure in the texts, and the numbers circulating online diverge. So we will not quote an amount at random. What is stable is the conditions: the gift must be tied to an identifiable event, stay modest in value, not replace a bonus or a thirteenth month, and not be convertible into cash. A transferable voucher, or one exchangeable for cash, loses the benefit of the tolerance and is taxable from the first euro. For the amount applying to the current year, the right move is to confirm it with the Administration des contributions directes (the direct-tax authority) or with us, rather than relying on a copied figure.

Do not confuse it either with two neighbouring, well-defined schemes: the meal voucher, which follows its own exemption rules, and the benefit tied to a company car. Each has its own treatment: a year-end gift is neither one nor the other.

How to book it properly

On the entry side, a client gift is recorded under external charges, in the family of entertainment costs and gifts to clients of the standard chart of accounts (PCN 2020). What makes the bookkeeping sound is not the account number, it is the matching: the purchase invoice in the company's name, the document recording the recipient and the reason, the VAT handled correctly depending on whether the gift stays low value or not, and posting to the right financial year.

This is precisely what reconciles on its own when accounting is kept continuously rather than caught up at the end. At Advena, the invoice for the hamper ordered today is allocated today in the Odoo where we keep your accounts, with the right VAT treatment. You do not discover a pile of gifts to reclassify at year-end: every document is in its place, and the VAT return builds on it. We describe this way of working in our complete guide to the accounting firm in Luxembourg.

Who these rules are not enough for

Let us stay honest about the limits. If you hand out high-value gifts, trips or regular perks, you move beyond the simple low-value gift and each case needs review. If your pay policy includes bonuses, profit-sharing or an overall plan, that calls for dedicated advice we do not claim to replace. And if your operations involve complex structures, we point you to the right contact, without claiming a title we do not hold. For an SME that simply wants to give a few year-end gifts and treat them correctly, though, the rules above are enough.

Frequently asked questions

Is a client gift deductible in Luxembourg?

Yes, when it is an operating expense incurred in the interest of the business and documented (date, recipient, business reason). A gift with no business link falls into liberalities, which article 168 of the income tax law excludes from deductible expenses.

Can you reclaim VAT on a business gift?

Yes for a low-value gift or a commercial sample given for the needs of the business: article 13 of the VAT law excludes them from the deemed supply, so no VAT is due and the input VAT stays deductible. Beyond low value, giving the good away triggers a deemed supply and the VAT must be accounted for.

Is there a euro threshold for low-value gifts in Luxembourg?

No. The Luxembourg VAT law refers to "low-value gifts" without setting any figure in the text, unlike France, which applies a precise ceiling. The French threshold does not apply in Luxembourg; the assessment is made case by case.

Is a gift voucher given to an employee taxable?

In principle yes, as a benefit in kind added to pay and subject to contributions, unless it falls under an administrative tolerance for an occasional gift tied to an event, modest in value and not convertible into cash. The exact amount of this tolerance must be confirmed for the current year with the Administration des contributions directes.

Where do you record a client gift?

Under external charges, among entertainment costs and gifts to clients of the PCN 2020. The key is the matching: invoice in the company's name, proof of the reason, VAT handled according to the value of the gift, and posting to the right financial year.

Read more

• Deductible company expenses in Luxembourg: what counts and what does not
• Meal vouchers in Luxembourg: €15 value, €12.20 tax-free
• Company car in Luxembourg: benefit in kind, VAT and Odoo Fleet
• Accounting firm in Luxembourg: the complete guide for an SME
• What an accounting firm costs in Luxembourg: fixed fee, hourly rates and hidden extras

Why Advena?

• Every document in its place: the gift invoice is allocated to the right PCN 2020 account with the right VAT treatment, in the right financial year, not reclassified at closing.
• Real-time accounting: we keep your books in the Odoo we deploy at your company, and VAT builds on up-to-date entries.
• A clear fixed fee, from €325 a month: accounting, VAT, annual accounts and payroll included, with no hourly billing.
• We inform, we do not invent: when a rule is not set by a figure in the texts, we tell you, rather than copying a wrong number.

Information up to date as of November 2026, based on the amended law of 12 February 1979 on VAT (article 13) and the income tax law (article 168). The treatment of gifts to employees rests on administrative tolerances whose amount must be checked for the current year. This article is for information and does not constitute individual tax advice.