{"id":5571,"date":"2023-12-14T11:29:29","date_gmt":"2023-12-14T10:29:29","guid":{"rendered":"https:\/\/www.ecovis.com\/focus-china\/?p=5571"},"modified":"2023-12-14T11:29:29","modified_gmt":"2023-12-14T10:29:29","slug":"employer-gift-giving-in-germany-and-china-explained","status":"publish","type":"post","link":"https:\/\/www.ecovis.com\/focus-china\/employer-gift-giving-in-germany-and-china-explained\/","title":{"rendered":"Employer Gift-Giving in Germany and China Explained"},"content":{"rendered":"<p>Christmas season is around the corner, and many companies are gearing up to prepare Christmas presents for their employees. Before diving into the festive spirit, it&#8217;s crucial for a company to pay attention to certain aspects in advance to avoid potential tax issues. This text will delve into the tax benefits associated with Christmas gifts for employees in both Germany and China. Additionally, it will highlight the &#8216;traps&#8217; that companies should be wary of to ensure a smooth and compliant process.<\/p>\n<h3><strong>The Case in Germany<\/strong><\/h3>\n<p>In Germany, the so-called \u201cSachzuwendungsfreigrenze\u201d (<a href=\"https:\/\/www.gesetze-im-internet.de\/estg\/__8.html\">\u00a7 8 Abs. 2 Satz 11 EStG<\/a>), allows tax-free gifts valued under 50\u20ac per employee. However, a careful approach is crucial, as cumulative gifts in the same month should not surpass the 50\u20ac threshold. Company-held Christmas parties offer a higher gift price limit of 60\u20ac, with the total expense capped at 110\u20ac per person.<\/p>\n<p>Other considerations related to the \u201cSachzuwendungsfreigrenze\u201d include:<\/p>\n<ul>\n<li>The 50\u20ac should be classified as \u201cextra welfare\u201d.<\/li>\n<li>The gift cannot be monetary. If it is a coupon, it must adhere to additional requirements outlined in <a href=\"https:\/\/www.gesetze-im-internet.de\/zag_2018\/__2.html\"> 2 Abs. 1 Nr. 10 ZAG<\/a>.<\/li>\n<li>Recording this expenditure is obligatory.<\/li>\n<\/ul>\n<p>Gifting \u201cKleine Geschenke\u201d (small gifts) to the employees is also possible. These are categorized as an operational expense (Betriebsausgaben). However, the price limitation decreases to 35\u20ac per person. If the present bears the company&#8217;s logo, the expense may be considered part of the \u201cmarketing and promotion\u201d budget. While there&#8217;s no legal price restriction, companies opting for lavish gifts can address tax implications by choosing to pay a 35% tax on the gift amount. It is important to note that providing gifts is voluntary, and the article explores the nuances of navigating the tax implications for both employers and employees.<\/p>\n<h3><strong>The Case in China<\/strong><\/h3>\n<p>Unlike Germany, there is no fixed price or seasonal limitation on \u201cwelfare\u201d for employees in China. Companies in China have the flexibility to provide \u201cbenefits\u201d to their employees at any time. However, if a company is not careful, they may end up paying unnecessary tax fees.<\/p>\n<p>Whether in cash or material form, any \u201cwelfare\u201d (Fuli) given to an individual employee is subject to individual income tax (IIT). There is one exception. When the benefits are a \u201ccollective welfare\u201d, meaning they are enjoyed collectively, indivisibly, and non-cash, they won\u2019t be subject to IIT. For instance, if a company prepares mooncakes for its employees during the Mid-Autumn Festival and distributes them individually in boxes, IIT will be applicable. On the other hand, if the mooncakes are unpacked and placed in the company&#8217;s cafeteria for shared consumption, no IIT is involved. No VAT will be charged in this scenario as it is considered consumption rather than a transaction. It&#8217;s crucial to note that the \u201cemployee welfare expense\u201d should not exceed 14% of the total wages and salaries; exceeding this limit may result in an increase in the corporate taxable income (CTI) amount.<\/p>\n<blockquote><p><em>Deductions are allowed for employee welfare expenses incurred by an enterprise up to 14% of the total amount of wages and salaries.<\/em><\/p><\/blockquote>\n<p><em>by Article 40 of the Regulations on the Implementation of the <\/em><em>Enterprise Income Tax Law of the P. R. China<\/em><\/p>\n<p>If you are not sure which gifts from your specific company count as which expense, contact a professional to make sure that you are compliant with everything.<\/p>\n<p>The situation described above pertains to a company purchasing gifts from external sources. However, if the present is self-produced or commissioned goods by the company, they are a \u201cdeemed sale\u201d. Even if they are intended for collective welfare. Hence, they are subject to VAT. Nonetheless, the input VAT can be deducted, so worth a consideration.<\/p>\n<p>We are happy to support you about any tax, accounting or legal questions you may have. Our team from Ecovis Heidelberg and Ecovis Shanghai stand by your side in both countries. Contact us!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Christmas season is around the corner, and many companies are gearing up to prepare Christmas presents for their employees. Before diving into the festive spirit, it&#8217;s crucial for a company to pay attention to certain aspects in advance to avoid potential tax issues. This text will delve into the tax benefits associated with Christmas gifts [&hellip;]<\/p>\n","protected":false},"author":14,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[798],"tags":[],"class_list":["post-5571","post","type-post","status-publish","format-standard","hentry","category-blog"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Employer Gift-Giving in Germany and China Explained - Ecovis Focus China<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ecovis.com\/focus-china\/employer-gift-giving-in-germany-and-china-explained\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Employer Gift-Giving in Germany and China Explained - Ecovis Focus China\" \/>\n<meta property=\"og:description\" content=\"Christmas season is around the corner, and many companies are gearing up to prepare Christmas presents for their employees. 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