Christmas Events, Gifts and Bonuses: How to Account for Them Properly
As the end of the year approaches, many companies begin planning Christmas events, employee gifts and seasonal bonuses. These activities play an important role in employee motivation and company culture. At the same time, they also come with specific accounting and tax considerations. To avoid uncertainties and compliance risks, it is essential to understand how these expenses should be classified and recorded.
Accounting for Christmas Events
Company-organised events for employees are generally recognised as business-related expenses. This applies when the event is intended for employees and serves the purpose of team building, motivation, or maintaining a healthy work environment.
In such cases, event expenses may be treated as staff sustainability or motivation costs. If the event meets the criteria of being related to business activities and is not considered representation, the input VAT may be deductible.
If the event is targeted towards clients, partners or public relations, the costs may be classified as representation expenses, for which VAT deduction is not permitted.
Employee Gifts
Employee gifts are subject to specific tax treatment depending on their value and nature.
Gifts up to EUR 50 per year
An employer may give an employee a gift worth up to EUR 50 per year, and this amount is exempt from personal income tax and social security contributions. The gift must not be monetary or equivalent to cash.
Gifts exceeding EUR 50
If the value of a gift exceeds EUR 50, the amount above this threshold is considered a taxable benefit. This portion is subject to personal income tax and social security contributions as employment income.
Gifts to employees’ children
Gifts given to employees’ children are treated as gifts to the employee. Therefore, the same EUR 50 tax-exempt limit applies.
Christmas Bonuses
Christmas bonuses remain one of the most common ways for employers to express appreciation to their staff. Regardless of the reason or format, these bonuses are always treated as employment income.
This means they are subject to:
- personal income tax,
- employee and employer social security contributions,
- reporting in payroll and tax records.
Bonuses may be paid as performance rewards or as a general Christmas allowance, but the tax treatment remains the same.
Gifts to Clients and Partners
Many companies choose to give symbolic gifts to clients and business partners during the festive season. These expenses are usually classified as representation expenses.
For representation expenses:
- VAT input deduction is not allowed,
- a specific tax regime applies under corporate income tax rules.
If gifts are used more broadly for marketing purposes (for example, branded materials or promotional items), they may in some cases be recognised as advertising expenses. In such cases, VAT deduction may be possible, but each situation should be assessed individually.
Recommendations Before Year-End
To avoid tax-related risks, companies should consider the following in advance:
- review budgets for events and gifts,
- set clear limits and guidelines for employee gifts,
- determine the correct category for each expense (motivation, representation, benefit, etc.),
- ensure proper documentation and justification for all costs.
Christmas events, gifts and bonuses form an important part of company culture, but they also require accurate accounting and proper tax treatment. With thoughtful planning, businesses can maintain both employee satisfaction and compliance with accounting rules.
If you need support in assessing specific expenses or preparing accurate accounting records, the Oceans team is ready to assist with the most suitable solutions.
