Bonuses and Christmas gifts: tax treatment

During the Christmas holidays, employers usually match the incentives to their employees in the form of gifts or as sums of money. What are the procedures for identifying the value of benefits in kind? What are the conditions necessary to ensure that donations can be regarded as exempt from income tax for the lender? The gifts to employees are deductible for income tax / IRES and IRAP?

The strategies followed by companies in the field of incentives linked to the Christmas holidays are basically two:

1. The first consists in the payment of gifts or Christmas gifts to employees;

2. the second consists in the payment of additional amounts to the traditional bonus or thirteenth.

These policies can then be implemented through individual or collective incentives.

Good planning involves the need to identify the correct tax treatment and social security in relation to two factors:

• the impact on the income of employees and co-workers (donations produce the same consequences in terms of tax and social contribution, since the tax base for the calculation of contributions to social security funds coincides with the tax);

• the consequences with respect to the deductibility for the employer from business income or self-employment.

 

All goods and services generally take as salary for tax purposes. Simplifying it can be assumed that in the majority of cases:

• the granting of gifts (such as panettone, Christmas basket, etc) and / or sums of modest value is used to reward employees in general;

• the granting of gifts (such as televisions, mobile phones, trips, electronics, etc.) or sums of high value is used to gratify the individual employee.

 

Effects as the provider to work

The employer must therefore determine whether the provision of such benefits falls within the provisions of art. 51, c. 2, letter. b) the FCA or the c. 3 of the same article. Necessary to determine which services contribute to determining the income from employment, which is the one constituted, in general, by all sums (and values) in any way perceived in the tax period, also in the form of donations, in relation to the employment relationship. Explanatory guidance on the standard have been provided by the circular of the Ministry of Finance no. 326 / E, 1997.

 

Criteria for identifying the value of the property

Of particular importance are the procedures for identifying the value of benefits in kind in respect of the supply of goods and services pursuant to art. 51, c. 3. The standard system provides a precise valuation of the goods and on specific provisions are provided only for items that are not usually sold during the holiday, such as vehicles, loans, manufactured leased.

For the determination of the cash benefits in kind, however, you should apply the provisions relating to the determination of the normal value of goods and services, or to the average sum paid for goods and / or services of the same species (or similar), referring to the lists or in the rate of the person who supplied the goods.

 

Only for the goods in kind produced by the company, and sold to employees by way of homage normal value is determined as the average sum by the same company for the same goods in sales to wholesalers.

This prediction is, however, applicable only to firms making supplies to wholesalers, are excluded from it:

• artists,

• professionals,

• companies that manufacture and sell only retail,

• companies that produce services

• companies who only market goods.

 

Evaluation of the exemption limit

The value of the supply of goods and services provided to the employee does not form part of the taxable income of the employee if the total amount in any tax year does not exceed € 258.23 per year, if the value exceeds this limit, the same would help you for whole.

For donations the legislature has expressly provided that the amount exempt should not be higher, with the tax period, to € 258.23. Disbursements in excess will be taxed only for the portion exceeding that amount, and help to establish a worker's income, producing its consequences on social security.

 

Restrictions for donations

The legislature has placed further restrictions relating to the exemption relating to donations. In particular, there are three elements necessary to ensure that such disbursements may be considered exempt from tax on the income of the lender:

 

• the liberal character of the disbursement;

• the granting of the same year on special occasions such as anniversaries recognized and / or holidays, to be understood in the broadest sense of the term and flexible (both celebrations linked to the employee that the company);

• the provision of the same by the employer for the majority of workers or of the same category identified in accordance with objective parameters.

 

Practical Implications

The employer at the time of delivery of a gift or a liberal supply during the year-end holidays to employees will have to assess for each employee if the tax period have been or are being overcome the pre-established limits and act accordingly:

 

• in the case of adoption of policies to gratify all employees should be careful to comply with all the requirements of the c. 2, letter. b) of art. 51 of the Tax Code and to assess whether some employees during the year have already been made other donations;

• in the case of adoption of policies to reward the individual employee shall in the case of payment of benefits to consider them always fully subject previdenzialmente and fiscally, while in the case of gifts or gifts must comply with the exemption limit in respect of other goods or services provided in the tax year.

 

Tax effects for the employer

Donations of any amount of money not detect granted special treatment, as they are considered expenses for employees and follow their rules. While with respect to the tax consequences that operated in the gifts to employees produce in relation to the employer, in tratttazione is necessary to distinguish two different issues.

 

The treatment provided for VAT purposes

The value added tax, imposed on the goods and / or services covered by the performance liberal, remains, in general, paid by the employer. It should however be stated that for the identification of the rules applicable to the VAT treatment is necessary to distinguish the case in which the property data homage are not the subject of the business, from the hypothesis that donations have as their object the same products of the company .

• In the first case, the tax on the asset to be liberal provision for the employee to be considered non-deductible from the purchase regardless of the unit value or cost of the assets. The next time the sale of the property free of charge to the employee does not fall under the head of VAT application, so the operation should neither be charged nor recorded (so-called "out of range");

• In case, however, the real object of the service for liberal employees fall between those of the business object at the time of purchase, the VAT will be deducted can not be expected if the property is subsequently used for business activities or as a gift for the employee. That said, the next phase of the sale to the employee, the employer will in any case be obliged to invoice the value assigned, recording the movement according to the usual methods.

 

Indeed, with reference to gifts for employees or third parties, is a particular regime at variance with the ordinary discipline.

In particular, in consideration of the purposes of the homage, is not allowed to exercise the cd. recourse against the client (in our case the employee), to shoulder the burden of the tax himself.

In the latter case, the employer may:

• issue the bill of sale, pursuant to art. 21, Presidential Decree n. 633/1972, without exercising revenge and reporting, therefore, on the document, the word "revenge is not exercised";

• issue a cd. "Self-invoice for giveaways", identifying the value of supplies liberals and reporting in the document, the word "self-invoice for giveaways", in which case the invoice must be registered by the issuer only and should not, therefore, also be sent to the recipient of the homage;

• Lastly, the employer may choose to record the assignment in the appropriate "register freebies", indicating the total amount of the goods: in the latter case, the total amount of the goods must then be stated in the invoice register and will contribute to the tax settlement.

 

The deductibility for income tax / IRES and IRAP

With reference to the possibility of deducting the gifts to employees from income tax, it should be noted that these sales are considered liberal expenses for retirement benefits and therefore be considered as wholly deductible for Irepef / IRES, pursuant to art. 95 of the Tax Code. It is believed that the cost of gifts does not suffer from the limitations set in terms of partial deductibility of expenses. If the unit value of the assets is greater than the deductibility € 25.82 will be reduced to a third in five years.

Are deductible from the taxable base for IRAP costs relating to gifts only if they are intended for all employees and contractors. Where aid is paid to individual employees or categories, and in the case of cash donations will not be allowed deductions instead.

 

 

27/12/2007

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Translated via software

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Source:

Italian version of ReteArchitetti.it