Presents and gift vouchers for employees - how to settle a gift from working capital vs. CSBF?

Giving employees presents at Christmas has become a tradition. Most companies give gifts to employees in the form of a box of presents or vouchers. However, doubts arise in the case of settlement of the costs related to this type of activity. Christmas presents and gift vouchers for employees can be financed from the company's own resources or from the Company Social Benefits Fund (CSBF). The tax settlement of these kind of expenses depends on the source of their financing.

Christmas presents for employees paid from working capital

If the company finances expenses for presents and vouchers from its working capital, they should be included in tax deductible costs. In this case, they must be considered as expenses for employee purposes, which are indirectly related to obtaining income. If the purchase of Christmas gifts for employees is charged to the company's tax costs, it can not be a social expenditure, which means that the value of the presents can not be dependent on social criteria, that is, the life, material or family situation of the employees.

In light of Article 12 of the Personal Income Tax Act, it is obvious that both vouchers and christmas presents for employees constitute income from employment, so they should, in principle, be subject to PIT in principle, as is the case with monthly salaries. The financing of such expenses from working capital, received from the benefit in question, is treated as taxable income for employees. For this purpose, their value should be added to the income from employment and then taxed. It will also increase the basis for the assessment of social and health insurance contributions.

An exception to this would be benefits which, according to health and safety regulations, are exempt from tax pursuant to Article sec. 21 1.11-11b of the PIT Act. This applies to vouchers or coupons, which entitle the recipient to get meals, groceries and non-alcoholic beverages, when the employer is not able to give meals to its employees, despite an obligation to provide such meals resulting from health and safety regulations.

Christmas presents for employees paid from the Company Social Benefits Fund

Setting up a Company Social Benefits Fund is compulsory for employers employing, as at 1 January 2017, at least 50 employees in full-time or equivalent posts. For companies that do not meet this criterion, the CSBF can be created on a voluntary basis.

In light of Article 21.1.67 of the PIT Act, the value of Christmas presents financed from the CSBF is exempt from income tax up to an amount not exceeding in total: up to 2017 - PLN 380, from 2018 onwards - PLN 1000, during the tax year. In turn, exceeding this limit will mean that any surplus will constitute income from employment and will be subject to income tax. Vouchers, which according to the Act are not considered as in-kind benefits, are not exempt from income tax, even if they are financed from the Company Social Benefits Fund.