Almost the end of the year… What gift will be under the Christmas tree for your employees?

Understanding the standard gift exemption  

If you give one or more gifts on the occasion of Saint Nicholas, Christmas or New Year, these can be exempt from social security contributions and withholding tax if the total amount per year and per employee does not exceed €40. If the employee has children, this amount may be increased by €40 for each dependent child. year. The cost for the employer is fully tax deductible. 

If your gift is more expensive than the amounts mentioned above, social security contributions and withholding tax must be paid on the total value of the gift. This is one of the topics most frequently investigated during an inspection by the NSSO or the tax authorities. Being well prepared pays off. Moreover, it could be considered as a taxable benefit in kind in the hands of the employee. 

Also regarding the occasions for which you give a gift, the tax authorities are slightly more lenient than the NSSO. If you give several gifts throughout the year with a maximum value of €40, such as a birthday present and a Christmas present, these gifts will be accepted by the tax authorities but not by the NSSO. Among other occasions, the tax authorities also accept birthdays. So, choose the occasions for giving gifts wisely. 

Not only physical gifts fall under the above rules, but also gift vouchers. 

For the exemption, it is important that these gifts or gift vouchers are mentioned on the annual payroll overview. 
 

Collective benefits for rewards over €40 

If you want to give an amount of more than €40, there are some interesting collective alternatives. 

1. 1
   The sport and culture vouchers (for now)

   It was announced that these would disappear, but for the time being they still exist. If you have not yet awarded sport and culture vouchers to your employees this year, you can still do so up to a maximum of €100. Sport and culture vouchers are exempt from social security contributions and withholding tax, on the condition that they are mentioned on the annual payroll overview. A point of attention is that sport and culture vouchers are considered a disallowed expense, hence corporate income tax will be due.
2. 2
   Eco-vouchers (second possibility, which may disappear next year)

   If you have not yet awarded eco-vouchers this year, or have awarded them for an amount below €250, for example if the sector only grants €125 per year, you can still award them free of social security contributions and withholding tax up to a maximum of €250. If you choose for this option, this must be included in an annex to the employment agreement or in a company-level collective labor agreement (CAO). Moreover, eco-vouchers must also be mentioned on the annual payroll overview. Be careful that any sectoral benefit of eco-vouchers is not (partly) granted in another form, for example by converting it into an increase in meal vouchers. A point of attention is that eco-vouchers are considered a disallowed expense, hence corporate income tax will be due.
3. 3
   The profit bonus

   If the financial year closes with a profit, you also have the option to grant a profit bonus. This is a collective bonus awarded to all employees, up to the amount of the profit. An identical profit bonus must be recorded in the minutes of the general meeting in which the annual accounts are approved. If you want to differentiate based on objective criteria, an act of accession or a company-level CAO is also required. The profit bonus is subject to employee social security contributions, but only to 7% withholding tax. The profit bonus must also be mentioned on the annual payroll overview. Another advantage of the profit bonus is that it falls outside the salary norm. A point of attention is that a profit bonus is considered a disallowed expense, so corporate income tax will be due.
4. 4
   Collective bonus is the CAO90-bonus (non-recurring, performance-related benefits)

   Because this is linked to the achievement of collective objectives, it seems somewhat less suitable for use as a gift. The act of accession or the company-level CAO must also be formalized at the start of the reference period. The CAO90-bonus is subject to employee social security contributions and exempt from withholding tax. Note, however, that a special employer contribution of 33% is due.
5. 5
   There also remains the option to give a “classic” bonus.

   For this bonus, there is no obligation to grant it collectively. There are no fixed rules, but it is advisable to ensure there is a written document showing that this is a one-off act of generosity. A classic bonus must also be mentioned on the individual payroll overview. A classic bonus will always fall within the salary norm.