Small gifts motivate employees and are deductible at the same time. But what do employers have to pay attention to so that the tax office supports the appreciative donation? How expensive can a gift be? When is it tax-free and when does the flat-rate tax apply?
Which gifts to employees are deductible?
The Income Tax Act regulates the value and type of gift for benefits in kind with flat-rate tax. Deductible gifts must therefore always be given to employees as material assets. These can be vouchers, bouquets of flowers or other presents. A job ticket and famous pens are also deductible gifts under the law. There is only one type of gift that the Income Tax Act does not allow – money.
But even with cashless recognition in the form of employee gifts, there are differences in the type, occasion, and deductibility as a business expense.
How expensive can a tax-free gift for an employee be?
There the tax office differentiates between gifts for a personal occasion and monthly gifts in the form of gifts. In principle, the employer can of course spend as much as he wants on a gift – but if he wants to give tax-free gifts, certain limits apply.
A personal occasion: gifts to employees up to 60 euros tax-free
Presents for birthdays, weddings or the birth of a child are the classics. Employee gifts are completely tax-free up to a gross value of 60 euros per occasion and month. You can claim this in full as a business expense and thus save taxes. It is important that employers write down exactly what they have given and, above all, on what occasion. For only the gifts to important personal occasions accepted the legislature as a tax-free and at the same time deductible.
Examples of personal occasions:
- Company anniversary
- the birth of a child
Monthly up to 44 euros tax-free
Christmas gifts, presents at the company party, or rewards for good work are also gifts, but these are only tax-free up to 44 euros per month. No personal reason is required for the so-called 44 euro exemption limit so that employers can exhaust the monthly exemption limit all year round. Whether it’s a ticket, a contract in the gym, or fuel vouchers is up to the company. In any case, employees receive additional benefits in the form of monetary benefits. At the same time, these gifts to employees are considered business expenses and thus have a tax-reducing effect. The two deductible gifts can also be used combined. If, for example, you reimburse your employee for a ticket every month, you can still give them a gift on personal occasions.
Gifts: the tax-free alternative to a salary increase
Sample calculation: You reward your employee monthly with a contribution in kind of 44 euros and give them an additional gift on their birthday from playtime (https://medium.com/@playtime), wedding, and the birth of their child. The employee benefits from 708 euros more net per year.
From what gift value does the flat-rate tax apply?
The tax exemptions are not always sufficient to show employees sufficient appreciation. The legislature has also understood this and therefore allows deductible gifts of up to 10,000 euros per employee and year. However, these are no longer completely tax-free. Employers pay a flat tax of 30 percent so that employees do not have to pay any tax. The flat-rate tax is also fully deductible as a business expense for companies.
How does the employer keep track of gifts and tax exemption?
For tax-free employee gifts, it is always important that no money flows. Only gifts in the form of benefits in kind are tax-free or subject to flat-rate tax. The limit values must also be observed in any case. In the case of courtesies from the employer on special, personal occasions, the tax office wants to know exactly on what occasion the gift was given. If you repeatedly take away something to your employees a year, it is not always easy to overview to keep. With the SpenditCard Employers always have an overview of all benefits in digital form and employees are happy to receive digital “universal vouchers” in the form of prepaid credit cards with which they can use to shop.