The Small Benefit Exemptions in Europe: UK|IE|PL|FR|ES|NO|NL|DK|DE
Gifts from employer to employees are common when it comes to progressive organizations that want to keep their teams motivated. Not only do they bring superior results in numbers and performance, but also set an example for others. What do the Small Benefit Exemption rules in Europe say about tax on gifts to employees? Find it all here.
These gifts, however, can’t be given with a free hand. Throughout Europe, gifts are considered to be taxable when they surpass a given amount, to which it is considered to be tax-free. The associated tax rules can be complex (PWC) but often straightforward too. The scheme titles vary country by country but ‘Small Benefit Exemptions’ and ‘Tax-Free Gift Allowances’ are common. A little understanding opens up a new motivational practice for the savvy business or HR leader.
SBEs help an organization to tactfully send out gifts to its employees now and keep it tax-free. SBE is the limit on gift tax to which an organization can send out gifts without bearing the tax burden. Across Europe, we are going to explore the Small Benefit Exemptions of the following countries:
- The United Kingdom
- Ireland
- Poland
- France
- Spain
- Norway
- Netherlands
- Denmark
- Germany
Small Benefit Exemptions in Europe: Tax-free Gift Guide
United Kingdom
Tax Exemption Limit: N/A
As per the UK’s IRS, there are no tax exemptions on any kind of gifts except ones that are termed trivial benefits. According to this norm, the organization, while submitting their tax obligation, won’t have to pay any tax on employee benefits on following conditions thanks to the employee small gift exemption:
- it costs the employer £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for employees’ work or performance
- it isn’t in terms of their contract
For any voucher that’s exchangeable for cash, it’s taxable in the employee’s earnings under “other earnings”.
For non-cash vouchers, however, there are certain exemptions (the list of which you can check out here) that are disregarded while calculating an employee’s earnings. Apart from these exemptions, it’s all taxable income.
Both the above vouchers count as earnings, so the employer has to:
- Add their value to the employee’s other earnings
- Deduct and pay PAYE tax* and Class 1 National Insurance through payroll
*PAYE tax is exempted in case of non-cash vouchers
Ireland
Tax Exemption Limit: €500 Per Capita P/A
In the Republic of Ireland, an amount of €500 can be sent out as a gift to the employees by the employer. This is only considered as a Small Benefit Exemption in case the gift is in the form of a voucher or benefit, and they can only be redeemed for goods and services. A voucher that can be redeemed for cash is fully taxable at applicable employee and employer rates. The small gift exemption in Ireland is as below:
The employer can provide long service awards to employees which are not taxable at all. This can be done at the rate of €50 for every year of employee service to the organization. The employees are exempt from paying PAYE, PRSI, and USC on the value of the award—as long as it is in-kind (non-cash benefit) and complies with the above-mentioned conditions. For more information, refer to the Revenue Commissioners, Ireland.
Poland
Tax Exemption Limit: N/A
If organizations with employees in Poland provide their employees gifts from the Company’s Social Benefits Funds aka the ZFŚS, then there is no tax on gifts to employees.
The ZFŚS has a separate bank account for all the employees in the Polish database with an employer and employee’s contribution to each. The fund can be dispersed in leisure, healthcare, entertainment, sports, recreation along with other expenses.
Gifts that are financed from the ZFŚS and fall in the categories above are exempt from taxes. The gifts partially funded from ZFŚS and partially from current assets of the organization won’t be exempted from tax irrespective of the amount.
But if an employee utilizes a benefit partially funded from their current assets and another part from the ZFŚS, they shall enjoy the tax-exempt employee benefits. For exact details, we advise you to connect with the designated tax office in Poland.
France
Tax Exemption Limit: €169 Per Capita P/A
Small Benefits Exemption does apply to gift vouchers in France. As for every employee, the gift value shouldn’t exceed €169 every year, according to the Ministry of Economy and Finance, the supreme tax collector in France. The amount up to this is exempt irrespective of the occasion.
There are some other particular exemptions where the threshold of €169 can be exceeded:
- When the gifts are given for an event that marks an important milestone e.g. wedding, birth, retirement, Mother’s Day, Father’s Day, etc.
- If the gift voucher given for the aforementioned event(s) is not redeemed for food or fuel (the voucher’s value should still be €169 per event and calendar year)
- Cultural events that promote the country’s colours and traditions
The detailed terms and conditions can be found on the French Tax Authority’s website.
Spain
Tax Exemption Limit: €299 Per Gift P/A
Apart from €11 daily meal vouchers, nursery vouchers, public transport, and medical insurance premiums (up to €500 per member covered), an annual gift voucher of €299 per employee fall under the Small Benefit Exemption in Spain. The Agencia Tributaria of Spain states that the employer can send out the gift voucher up to €299 provided that it can’t be redeemed for cash or cash equivalents.
Norway
Tax Exemption Limit: NOK2,000 Per Capita P/A
When gifts are given out under the organization’s general scheme, they are considered to be tax-free if the amount doesn’t exceed NOK2,000 per annum. There is no tax on employee benefits below NOK2,000 per annum. This limit is separate from gifts being given on the below conditions. All gifts to employees over this amount and without special occasions are taxable.
Here are some special occasions which call for tax-free gifts in Norway.
- Celebrations of the organization’s anniversaries: On occasions when the organization is celebrating its jubilees i.e. 25th anniversary (or multiples of 25), the employer can give up to NOK4,000 tax-free gift allowance to the board members as well as employees.
- Important events in the recipient’s life: In case the recipient gets married, retires, or leaves the organization after providing more than 10 years of service to the organization, then gifts up to NOK4,000 are tax-free.
- Gifts for associates that aren’t employees: Under a separate tax-exemption clause, individuals that aren’t employees of the organization can be rewarded tax-free up to NOK500 based on their performance and cooperation.
- Long service awards: Amounts up to NOK8,000 are exempted from tax if given as a gift to an employee who’s served the organization for 20 years, and after that, every 10 years.
- Gifts to employees up to NOK2,000: However, a fundamental condition for Small Benefit Exemption is the same as in other parts of Europe—the gifts must be non-cash. Gift vouchers are acceptable. For more information, refer to the Norwegian Tax Authority’s website.
Netherlands
Tax Exemption Limit: N/A
There are no specific Small Benefit Exemptions for Dutch organizations in favour of corporate gifting. But in a general sense, there’s a small tax exemption for gifting to unrelated people.
The tax exemption on gifting to others i.e. anybody unrelated can be claimed for donations up to €2,207 per annum.
There are tax bands after the above limit according to which gifts are taxed by the Dutch tax authorities. For donations ranging between €0 to €126,723, the tax rate is 30% on the gift value. Meanwhile, for donations with a value that goes above €126,723, the tax rate is 40% on the gift value.
Denmark
Tax Exemption Limit: DKK1,200 Per Capita P/A
Skattestyrelsen, the Danish tax authority signifies that gift vouchers and other non-cash gifts aren’t taxable up to DKK1,200 in case they are unrelated to the employees’ jobs. However, gifts going beyond this limit are taxable to the given bands.
When it comes to Christmas gifts, values up to DKK900 are exempted from tax and this figure is apart from the DKK1,200 limit. Benefits related to employees’ jobs have a more relaxed threshold and they are tax exempt till their value exceeds DKK5,600. These include a company car, telephone bill, food, accommodation, etc on tax on employee gifts.
For more information, check out the Skattestyrelsen website.
Germany
Tax Exemption Limit: $44 Per Capita Per Month
In the German Income Tax Act (EStG), tax and social security contributions are exempted up to €44-a-month [Section-8, para two; clause 11].
According to the Bundeszentralamt Für Steuern aka the Federal Central Tax Office of Germany, the additional pay for work done by an employee is considered to be a non-cash benefit, hence, is exempted from tax up to the above amount.
The given exemption limit is not to be collected/transferred to other employees as their exemption limit expires at the end of each month—which resets and starts a new cycle. And if these benefits are used by the employee, it is called a gift. Section 19.6 (para one) of the German Income Tax Law (LStR) exempts from tax and social security contributions up to €60 for special personal occasions for employee small gift exemption.
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Now you know how the Small Benefit Exemptions work in the given European countries. For specific information like the tax on gifts to employees, limit on gift tax, or the tax-exempt employee benefits contact your concerned tax authorities.
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