Christmas gifts for employees and their taxation – what is worth knowing?

The festive period is a time when many employers decide to give Christmas gifts to their employees. However, it is worth bearing in mind that these gifts may have certain tax implications. When is a gift to an employee taxable and when not? What limits are worth bearing in mind and can the costs of gifts be included in tax deductible expenses (tax deductible expenses)?  

Employee income and Christmas gifts  

According to the Personal Income Tax (PIT) Act, an employee’s income is any benefit received in connection with their employment. This means that gifts given in the context of the employer-employee relationship can be considered as income from the employment relationship. Small gifts such as coffee, tea, sweets or regional delicacies are treated as fringe benefits and are in principle subject to income tax.  

The situation is different when the gift is a donation and not a benefit under the employment contract. If the gift is not related to the performance of work, but to important life events (e.g. a wedding, the birth of a child) or holidays, it may be subject to inheritance and gift tax.  

Limits of tax exemption  

The legislation sets limits beyond which tax must be charged. In the case of gifts treated as donations, for employees included in the so-called third tax group (persons not related to the donor), the limit is PLN 5733. Exceeding this amount results in the obligation to pay inheritance and gift tax.  

If the gift is related to an employment contract or remuneration regulations, the value of the gift constitutes the employee’s income and is subject to PIT. The employer is then obliged to withhold an advance on income tax.  

Christmas gifts and tax-deductible costs (tax deductible costs

From the employer’s perspective, it is important to determine whether the costs associated with the purchase of Christmas gifts are tax deductible. As a general rule, small gifts such as sweets or regional products can be included in the tax deductible expenses if they are part of employee relationship-building activities and are related to the operation of the company.  

It is worth remembering, however, that expenditure on gifts must not be of a representational nature. For example, the cost of purchasing alcohol for employees cannot be included in the BUI. The same is true for vouchers or gift cards, which may be considered as benefits related to remuneration. 

Summary  

It is worth planning in advance for Christmas gifts for employees and taking into account the tax aspects. The key is to determine whether the gift is related to the employment relationship or is a gift.  

Gifts that are part of the salary or given on the basis of employment regulations may incur income tax. On the other hand, gifts that are donations, if their value does not exceed set limits, are exempt from taxation.