Christmas isn’t far off and companies often like to invite customers and staff to Christmas parties and buy them gifts. While both Christmas presents and parties can lead to better business, with loyal customers and committed staff, they can also lead to accusations of bribery and to staff being taxed on their gifts if you make a mistake. This article will help you avoid the typical pitfalls.
Normally, the deduction entitlement and the limit for tax liability for Christmas presents is SEK 500. However, from 1 January to 31 December 2021, a temporary tax exemption applies to gifts, which means that employees are not subject to benefit-in-kind taxes for gifts from their employer, provided that the total value of gifts does not exceed SEK 2,000 and the gifts are not given in the form of money. This applies in addition to the existing standard tax-free gift allowance, for example for Christmas presents.
Consequently, in 2021, employers can combine the temporary gift allowance with the standard gift allowance to give their employees a tax-free gift of up to SEK 2,500. Although large employers can sometimes obtain large discounts, note that it’s the market value for the recipient that must remain within the values stated above.
Instead of giving Christmas gifts, many companies prefer to donate to a charity, but unfortunately such gifts are not deductible for the company. If the company gives money to staff to donate to charity, the money then becomes taxable for the employees, even if the entire amount is donated immediately.
As a general rule, Christmas gifts for customers are not deductible. However, simple promotional gifts, such as a calendar or pen with your company logo or products that are directly linked to your company’s range or production, are fine. In that case the company should give these to a large number of customers and not just an individual one.
The limit per gift is SEK 300 excluding VAT. It’s also fine to deduct gifts to customers in connection with representation, such as a business negotiation. In that case the deductible amount is SEK 300 per person excluding VAT and it’s a good idea to stick to gifts below that value. More expensive gifts may be considered bribery, which is illegal and definitely not deductible!
In some industries gifts are not allowed at all, so be careful and check the rules.
Deductions for corporate parties, food, and drink
A Christmas party is a fun event that’s often appreciated, but nowadays food and drink are not a deductible cost for the company. However, you can deduct the VAT on expenses of up to SEK 300 per person for food and drink. In addition, you can deduct SEK 180 plus VAT per person for related costs, such as theatre tickets or musical entertainment.
Refreshments or snacks that do not replace a meal may be deducted up to the value of SEK 60 excluding VAT. If you want to invite your customers to a Christmas dinner, you can deduct VAT only if this is in connection with a business negotiation. As with staff, you cannot deduct costs for food and drink at mealtimes.
At Azets we know what is and isn’t deductible
It’s not always easy to keep track of all the rules and deductible costs. At Azets we know how complicated a seemingly simple thing like buying employees Christmas gifts can be, especially if you’re a large company. We help companies in the Nordic region with accounting services and payroll administration. Don’t hesitate to get in touch
That being said, now that you have a better understanding of the rules, Azets would like to wish you a very merry, deductible Christmas!