Flat-rate taxation of gifts

The law provides for a flat-rate option for gifts to business associates so that the recipient does not have to declare the gift in their own tax return (Section 37 EStG). Gifts are subject to flat-rate income tax (30%) plus solidarity surcharge (5.5%) and flat-rate church tax (7%).

The total tax burden is 33.75% and consists of the flat-rate income tax (+30%), the solidarity surcharge on the flat-rate income tax (+1.65% = 30% x 5.5%), and the flat-rate church tax on the flat-rate income tax (+2.1% = 30% x 7%).

The flat-rate taxation is applied to the gross amount of the gift with statutory sales tax.

Change in the law regarding gifts

If you are entitled to deduct input tax, gifts can be claimed as deductible business expenses if they are less than EUR 50.00 net. Without the right to deduct input tax, the limit is EUR 50.00 gross including VAT, e.g. for doctors or insurance brokers.

If you spend more on business associates, the gift is not tax-deductible as a business expense, but the flat-rate tax still applies.

Whether or not the flat-rate tax of 33.75% is deductible as a business expense depends on whether the amount limit has been exceeded. For gifts above the limit of EUR 50.00, you must pay the flat-rate tax, but you cannot claim the expenditure for the gift or the payment of the flat-rate tax reported and paid to the tax office as a business expense.

Right to input tax deduction?

Input tax can only be reclaimed up to the limit for entrepreneurs who are entitled to deduct it. If the gift exceeds the limit of 50 EUR net before VAT, the input tax will not be refunded by the tax office.

Summary example of flat-rate tax and gifts

Applies only to entrepreneurs entitled to deduct input tax within the meaning of the Value Added Tax Act

Example A (< 50 EUR):

Gift costs 40 EUR net (47.60 EUR gross including 19% input tax of 7.60 EUR)

• The gift constitutes a deductible business expense
• The input tax (VAT) of 7.60 EUR is refunded by the tax office
• Flat-rate wage tax, solidarity surcharge, and church tax are payable on 47.60 EUR
• The flat-rate tax amounts to 16.07 EUR and must be declared with the wage tax filing for December
• In turn, flat-rate taxes remitted constitute deductible business expenses

Example B (> 50 EUR):

Gift for 178.50 EUR gross including 28.50 EUR sales tax

• The gift does not constitute a deductible business expense.
• The input tax (VAT) of 28.50 EUR will not be refunded by the tax office and is lost.
• Flat-rate wage tax, solidarity surcharge, and church tax are payable on 178.50 EUR.
• The flat-rate tax amounts to 60.24 EUR and must be reported with the wage tax filing for December.
• In contrast to example A (above), flat-rate taxes remitted do not constitute deductible business expenses.

Template for gift recipient list 2025

Please check whether you have given gifts to business associates in 2025 and, if so, return the completed Excel spreadsheet to us with your next payroll accounting at the latest so that we can apply the flat-rate taxation.

Download gift recipient list [Excel]

Audit only: Template for gift recipient list 2024

Should you be faced by a tax field audit, you may find the gift recipient Excel spreadsheet to be a useful tool for streamlining your documentation.

Download gift recipient list [Excel]