During Christmas, there is always a touch of magic. I believe you might want to bring joy to your employees and partners. What could this mean from a taxation perspective?
Let me clarify right away that everything related to employees is considered taxable fringe benefit. For example: if you give an employee a scarf worth 50 euros, you will pay 12.50 euros in income tax and 20.63 euros in social tax. The total cost of the gift is 83.13 euros.
However, a sports club membership or a wellness massage can be considered a good gift (if the employee has not already used up the last quarter’s health promotion expenses, which amount to 100 euros per quarter per person).
What expenses are tax-free?
Partially tax-free are reception expenses. The limit is 32 euros plus 2% of the payroll fund each month.
How can you find out how much of your tax-free reception expenses remain unused?
You can visit emta.ee and prepare a new TSD declaration. Within the declaration, go to Appendix 5, and in the section “Expenses related to catering, transportation, accommodation, or entertainment of guests or business partners,” enter 1 euro and click “Save.”
Numbers will appear in the appendix. Subtract the amount from the third row from the second row’s total, and you will get your remaining unused limit.
Reception expenses are costs incurred for catering, accommodation, transportation, or entertainment of guests and business partners.
Partially tax-free are also corporate gifts.
The limit is 10 euros (the gift amount excluding VAT), which can also include printing services.
Business gifts of higher value are taxable at a rate of 20/80 (meaning 20% income tax on the value). For example, if you give a partner a gift worth 100 euros, you will pay 25 euros in income tax on it.
If the business partner is listed in the VAT deduction list, we can apply a tax benefit.
The limit is either 3% of the total payments made at the beginning of the calendar year increased by social tax or 10% of the profit of the last fiscal year ending on January 1st of that year.
Good news – decorating your office is a tax-free expense! So if you haven’t yet brought some magic into your office, now is the perfect time!
