A Christmas present for an employee - what is taxable and what is tax-free?

Payroll & HR | 31.10.2023

by Mika Pahlsten

As Christmas approaches, many employers give presents to their employees. Perhaps a Christmas-decorated card appears on the desks of all employees, with the information that they will be given a gift basket as a Christmas present.

Hopefully, the employer has remembered to find out how the tax authority views the employer's gifts. Will the tax authority consider the gift as taxable earned income, comparable to a salary or is it tax free?

The Income Tax Act regulates the employer's Christmas presents

According to Section 69 of the Income Tax Act, the gift is not considered as taxable income if it is seen as a usual and of reasonable value anniversary gift or other minor gift received by the entire staff in a form other than cash or other monetary reward. Christmas gifts are seen as other minor gifts.

The Christmas gifts are not taxable if the gift is 

  • received by the entire staff
  • minor
  • not cash or other form similar to cash
  • personal, i.e. given to a named employee

What does a minor Christmas present mean?

Minor means small, modest or weak. The tax authority has defined a value in euros for the word minor. According to the tax authority's instructions, the value of a minor other gift may not exceed 100 euros. The amount has remained the same for several years.

No cash and nothing comparable to cash

A tax-free Christmas present cannot be given directly as cash or anything similar to cash. A gift that could be considered as comparable to cash could be, for example, a gift card from a store, which entitles the recipient to freely choose a gift. A sufficiently limited gift card, on the other hand, could be tax-free.

In the eyes of the tax authority, too much freedom of choice means that the gift is comparable to a salary and is therefore taxable income. Since the tax authority has not outlined in more detail, what constitutes too much freedom of choice, it is best that the employer chooses the gift.

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About Mika Pahlsten

Senior Legal Advisor, Azets