Free Distribution of Products for Marketing Purposes: Is VAT Applicable?
Marketing campaigns are an effective way to attract customers, but from a tax perspective, free product distribution may lead to additional VAT charges.
🔹 Tax Authority’s Position
- Free distribution = VAT based on the minimum taxable value
If a company provides products to customers for free, tax authorities consider this a supply of goods, and VAT must be calculated based on either the purchase cost or the usual price (if the product is self-manufactured). - If marketing products are included in the cost of the main product – VAT is not charged
If a free product is part of a service package or another product, meaning its cost is included in the overall pricing, then no additional VAT is applied.
🔹 How Can Businesses Optimize Expenses?
💡 Ways to Reduce Tax Risks:
✔️ Include marketing products in the cost of the main product – for example, if a customer buys a phone and receives a free case, the case’s cost can be incorporated into the phone’s overall price.
✔️ Use agency contracts – work with marketing agencies that organize promotions and transfer products to them under specific conditions.
✔️ Properly document transactions – contracts should clearly state that promotional products are part of a marketing campaign, not a separate supply.
🚀 Marketing without tax risks is possible! Need advice? We’ll help you find the best solution for your business!
