Christmas gifts for employees – Do you know the tax rules?

All the Christmas catalogs are already pouring in, and that means many employers have to find out what employees should get as this year’s company Christmas present. But what about the tax and VAT rules – fear not, we have compiled an overview here.

The company

As an employer, you have a tax deduction on “Christmas” gifts for staff, but not a VAT deduction. If the gifts are taken from the company’s stock – withdrawal VAT must be paid.

The employee

The employee can receive gifts and minor employee benefits for a value of up to DKK 1,200, without being taxable of this. The value of Christmas presents must be included in the amount of DKK 1,200, BUT Christmas presents up to DKK 900 are not taxable.

Occasional gifts, e.g. birthday or wedding gifts, that do not exceed an appropriate level are not taxed, there is no level of triviality and these are not included in the amount limit of DKK 1,200.

Example: the employee has received Easter eggs DKK 200, wine gift DKK 500 and Christmas gift DKK 900, total amount DKK 1,600 – The employee must therefore be taxed, but since the Christmas gift does not exceed the maximum amount of DKK. 900 as a Christmas present tax-free, the taxation will therefore be DKK 700.

Be careful with giftcards and cash

If the employees give giftcards or cash as this year’s company Christmas present, the gifts are taxable regardless of the amount. Here, too, there is an exception, if the gift cards are issued for specific products, they can be tax-free, for example if the giftcard applies to a few selected products from a gift provider on the web or equivalent.

Who is responsible for reporting to the tax authorities

The employee is responsible for reporting the value, in the above example DKK 700, on their annual tax return.

If the individual gift exceeds the amount limit of DKK 1,200, it is the employer’s responsibility to ensure that the amount is reported.

Wine gifts can be a challenge

Some companies often give wine as a gift, either as Christmas gifts to staff and or to customers – but be careful when buying large lots at a time, as there is a requirement for “inventory accounting”.

If the company purchases a large number of bottles and constantly has a stock of wine, from which its continuously taken from when a gift of wine is to be given it will be necessary to keep records of the purchased and given bottles to be entitled to a tax deductions. Remember to state receiver of the gift and the occasion.