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Christmas is around the corner once again! Many Swedish companies celebrate this lovely tradition by giving gifts and hosting Christmas parties for their employees and clients. However, there are several regulations surrounding these festivities to keep in mind for accurate tax treatment and to avoid unexpected benefit taxation.
Christmas Gifts for Employees
For the income year 2024, the tax-free amount for Christmas gifts to employees has been raised to 550 SEK, including VAT. Shipping and administration costs are not included in this 550 SEK limit. For the tax exemption to apply, the gift must be given to all or a large group of employees, and it cannot be in the form of cash. If these criteria are not met, or if the gift’s value exceeds the established amount, the entire market value of the gift will be subject to income tax as a taxable benefit for the employee.
A Christmas party or lunch for employees can be a deductible expense for the company if it falls within the limit of a maximum of two staff parties per year. The company is entitled to deduct VAT on meals up to 300 SEK per person, though no deduction is allowed for the actual meal cost. Additional costs (such as venue rental or entertainment) up to 180 SEK excluding VAT can also be deducted. Alumni, interns, retired employees, and family members may also join the celebration with tax deductibility.
Christmas Gifts for Customers
Customer relationships are important for all companies, and many take the opportunity to invite their clients to a Christmas lunch or send a Christmas gift. From a tax perspective, only simple promotional gifts worth no more than 300 SEK excluding VAT can be given to customers during the holidays, qualifying for a tax deduction for the company. For Christmas lunches or dinners, representation requirements regarding direct association must be met. There must be a timing, personal, and location connection for a meal with a customer during the holiday season to qualify as business representation.
Donations to Charity
An increasing number of employers are opting out of Christmas gifts for employees, choosing instead to donate to charitable organizations that support those in need. In this case, there is no taxable benefit for employees as they do not have control over the gift. Neither the expense nor the VAT is deductible for the company.
However, if the employee has the option to choose between receiving a Christmas gift or donating an equivalent amount to charity, the choice to donate would be considered a taxable benefit, as it is then treated as cash rather than a gift. If the employee makes the donation, the company may deduct the cost.
Need help navigating the deduction jungle?
It's not easy to keep track of all the regulations or deductible costs. If you need assistance understanding regulations around gifts and representation, we at Azets are here and ready to help!
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