News
Tips for tax-free Christmas gifts and organising a Christmas party
Companies often want to remember their staff and partners with gifts and organise Christmas parties as Christmas approaches. We’ve listed a few tax-related things to consider to avoid any nasty tax delays.
Christmas gifts for employees
Employers can give their employees Christmas gifts tax-free if the following conditions are met:
– the gift is given to all staff.
– the value of the gift does not exceed EUR 100.
– the gift is not in the form of money or a comparable benefit.
Examples of tax-free gifts include goods, services or gift vouchers entitling the recipient to a specific identified good or service. Gift vouchers that are open for free use for any service or good are not tax exempt.
Christmas gifts to employees are deductible for income tax purposes, but the VAT on them is not deductible.
Christmas gifts to customers and partners
Christmas gifts to customers or business partners are classified as either promotional gifts or representative gifts and are tax deductible depending on the nature of the gift.
Promotional gifts are gifts in bulk up to a value of €50. Promotional gifts must bear the company logo or be the company’s own products. Promotional gifts are deductible for VAT purposes and are fully deductible for income tax purposes.
Representation gifts are more personalised and more valuable than promotional gifts. VAT on gifts of representation is non-deductible and 50% of the cost is deductible for income tax purposes. Gifts of alcohol are always considered to be representative gifts, even if they otherwise meet the criteria for a promotional gift.
Charitable donations
A company can make tax-deductible donations to charity in two ways:
– donations of up to €850 for a charitable purpose that is both local and close to the company’s field of activity are deductible for company tax purposes. Such donations are deductible up to a maximum of EUR 850 per donor. Donations may be made to several different recipients and may be in cash or in kind.
– Donations of more than EUR 850 may be made by the company to bodies approved by the Tax Administration for the purpose of promoting science, art or Finnish cultural heritage. To be deductible, donations must be at least EUR 850 and no more than EUR 250 000.
It is also advisable to document the donations properly (donation object, amount and purpose of the donation) to ensure that they are deductible for tax purposes.
Organising Christmas parties
Employers can organise mini parties which are tax-free for employees, provided the following conditions are met:
– the event is a normal recreational activity.
– the event is intended for all staff.
– the costs are reasonable.
– the event is organised by the employer.
The parties are deductible for VAT purposes, including the alcohol provided. However, if customers are invited to the party, their share of the cost is a representation expense, 50% of which is deductible for income tax purposes, but none for VAT purposes.
Source: Tax Administration