Promotional gift tax-free limit in Estonia rose to 21 euros

Since 1 January 2025, the income-tax-free limit for promotional gifts in Estonia has risen from 10 euros to 21 euros (excluding VAT). The change allows companies to give clients and business partners more valuable branded products without paying income tax. It also clarifies how different promotional gifts, including cut flowers and potted plants, are taxed. Below we explain how the 21-euro limit works in practice – with worked examples.

What counts as a promotional gift under Estonian rules?

The basic concept of advertising comes from the Estonian Advertising Act (RT I 2008, 15, 108): the content, design and presentation of an advertisement must be such that, with ordinary attention, the public understands that it is advertising. A promotional gift is therefore goods or a service handed over for advertising purposes – typically a product bearing your company's logo.

A promotional gift is not subject to income tax if its value excluding VAT is up to 21 euros. The 21-euro income-tax-free limit applies both to VAT-registered companies and to companies that are not registered for VAT.

Special cases: cut flowers and potted plants

The cost of cut flowers given to business partners, including clients, is a business expense that is not taxed as a gift. Handing over cut flowers also does not create a taxable supply within the meaning of the Estonian VAT Act, regardless of their price (input VAT on the purchase can still be deducted in the usual way). This means the 21-euro limit does not have to be observed for cut flowers.

A potted plant given to a business partner for advertising purposes is not subject to income tax if its value excluding VAT is up to 21 euros, because it is treated as a promotional gift. For VAT, such a gift does not need to be taxed if its value excluding VAT is up to 10 euros. If the value exceeds 10 euros excluding VAT and input VAT was deducted on the purchase, the gift is subject to VAT.

The 21-euro limit applies per item – or per set

The promotional gift limit is calculated separately for each item given. For example, if a partner receives a potted plant on one occasion and a box of chocolates on another, handed over separately, the limit applies to each gift on its own.

If one gift consists of several items, the limit applies to the set as a whole. If a partner receives a potted plant, a bottle of wine and a bar of chocolate together, the acquisition costs are added up.

If the total acquisition cost of the items exceeds the 21-euro limit (excluding VAT), the whole gift (acquisition cost including VAT) is subject to income tax at the rate of 22/78 (form TSD, annex 5, code 5000). From a VAT perspective, this is a free disposal of goods that is subject to VAT; the taxable value is determined under § 12(3) of the Estonian VAT Act.

Logo printing, transport and packaging costs

The cost of printing a logo on a promotional gift is a business expense and is not taxed as part of the gift. The same applies to transport, postage and packaging costs: they are business expenses (input VAT on these invoices can be deducted) and are not taxed as a gift, because they do not increase the monetary value of the gift for the recipient.

Examples: a branded mug below and above the limit

Example 1: promotional gift worth less than 21 euros

A company buys mugs as promotional gifts for its clients and has its logo printed on them. The mug costs 19.87 euros excluding VAT, and the advertising cost (logo printing) is 1.68 euros excluding VAT. Although the company spends 21.55 euros per mug in total, the gift is not subject to income tax: the value of the mug excluding VAT is below 21 euros, and the printing cost of 1.68 euros is not added to it, because the logo does not increase the monetary value of the mug for the recipient.

A VAT-registered company must, however, bear in mind that if it gives a client goods whose taxable value (the price excluding VAT) exceeds 10 euros and input VAT was deducted on the purchase, the free transfer creates a taxable supply. The taxable value is determined under § 12(3) of the VAT Act on the basis of the acquisition cost of the same or similar goods, or failing that the cost price, at the time of transfer. In this example, the company paid 21.55 euros excluding VAT for one printed mug, which is its taxable value, so VAT of 5.17 euros (24% of 21.55) must be paid. There can therefore be cases where a gift is subject to VAT even though it is free of income tax.

Example 2: promotional gift worth more than 21 euros

A company buys mugs as promotional gifts for its clients and has its logo printed on them. The mug costs 21.13 euros excluding VAT, and logo printing costs 1.68 euros excluding VAT. The gift must be declared in annex 5 at market value: 21.13 + 5.07 (VAT) = 26.20 euros. The advertising cost of 1.68 euros is a business expense and is not subject to income tax.

If the company is VAT-registered, handing the mug over to a client free of charge creates a taxable supply. Here the company paid 22.81 euros excluding VAT per mug, which is the taxable value, so VAT of 5.47 euros (24% of 22.81) must be paid.

How to choose gifts within the limit

The simplest way to stay within the rules is to plan the product and the branding together. Practical mugs and other drinkware or small giveaways often fit comfortably under 21 euros, and the logo can be applied by screen printing or pad printing. You will find gifts in different price ranges in our product range.

Source: Estonian Tax and Customs Board – promotional gifts (in Estonian).

Logotrade is a member of the international promotional products networks PSI and ASI and of the Estonian Chamber of Commerce and Industry.

Looking for promotional gifts in Pärnu or elsewhere in Estonia? Browse our completed projects and blog, or contact our consultants.