As an employer, showing appreciation to your staff through gifts is a thoughtful gesture throughout the year. However, it's crucial to understand how the Finnish Tax administration views employer gifts. Will the tax authority consider your gesture as taxable earned income, comparable to salary, or might it qualify as tax free? Understanding these distinctions can save both you and your employees from unexpected tax complications.
The Income Tax Act regulates the employer's 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.
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The gifts are not taxable if the gift is
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What does a minor present mean?
According to the Finnish Tax Administration'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 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.
Should you have further questions on how to chosse employee gifts and benefits, we’re here to help you. Reach out to our payroll experts.
