Do you have to pay tax on your St Nicholas or Christmas present?
Absolutely
You will always have to pay VAT when purchasing the gift. And as a private individual (not a VAT-registered business), you are not allowed to claim that VAT back.
Business owners are allowed to deduct VAT on gifts. Naturally, this applies only if and to the extent that they provide services subject to VAT.
As soon as the gift is given to business associates or employees, it must be assessed whether that deduction needs to be reversed. In most cases, the BUA (Decision on the Exclusion of the Turnover Tax Deduction) is under discussion.
You must assess each year, during the final VAT return period, whether the BUA applies. Of course, this helps VWGNijhof You’re welcome to join in.
Payroll tax
If you receive a St Nicholas or Christmas present from your employer, you will be liable for income tax. After all, wages are “all benefits derived from the employment relationship“. So that includes the chocolate letter with St Nicholas and the Christmas hamper.
The gift is not subject to tax when it is given by the staff association. After all, this is an association that operates independently of the employer. If, as an employer, you wish to contribute to the staff association, you can staff fund offer significant benefits. You must, however, meet all the conditions.
And, of course, you can provide employees with tax-free St Nicholas and Christmas gifts within the discretionary allowance under the work-related expenses scheme. However, the discretionary allowance is limited to 1.2% of the total wage bill. Other items are usually included within this discretionary allowance as well.
Before the end of 2017, check how much of your tax-free allowance is left and, if you wish, use it to provide your employees with a tax-free bonus. You can also contact VWGNijhof.
Gift tax
You give a present out of generosity. This constitutes a gift. And the recipient of a gift is liable for gift tax.
Of course, most St Nicholas and Christmas presents fall within the gift tax exemptions. And the tax authorities aren’t going to get worked up over every chocolate letter you put in your children’s shoes.
A St Nicholas or Christmas present given to employees is not a gift. You are not giving the present out of generosity, but as part of the employment relationship. The work carried out by the employee is, in part, in return for the present. To put it simply: the present is part of their pay.
The same applies to gifts to business associates. You do not give these out of generosity, but with a view to your business interests. Consequently, for the purposes of gift tax, this does not constitute a gift. The business associate must, however, include the gift in his or her business profits or wages (third-party wages). Or you will have to pay this income tax yourself.