Birthdays, name days, birth of a child, round anniversaries of work experience, company anniversary, wedding, professional success. The list could go on and on – there are plenty of opportunities to give a gift to a subordinate appreciating it and showing a gesture of remembrance at the same time! However, how to treat such a gift for tax purposes? Will it be income from the employment relationship for the employee?
As a general rule, all benefits paid by an employer to employees constitute its income from the employment relationship. Regardless of whether these benefits are of a monetary or in-kind nature. However, this rule is modified in the case of taxation of income with a tax other than personal income tax, e.g. inheritance and gift tax.
In this context, the judgment of the Constitutional Tribunal of 8 July 2014 (file reference number K 7/13) concerning the generation of income from gratuitous services seems to be crucial. In this ruling, the conditions for including unpaid benefits in the employee’s income were formulated.
While analyzing this ruling, it can be concluded that the employee’s income may include benefits that, in particular:
- have been fulfilled with the employee’s consent, i.e. they have been used voluntarily, they have been fulfilled in the employee’s interest, and
- The benefit achieved by the employee is measurable and individually attributable, i.e. it is not available in a general way to all employees.
The conclusions formulated by the Constitutional Tribunal in this way mean that failure to meet at least one of the above-mentioned conditions excludes the possibility of recognizing a given benefit received from the employer as the employee’s income.
For the analysis of the above, the conclusions contained in the justification for the above-mentioned judgment are also important, referring to services of an exceptional, non-standard nature, resulting from special circumstances. The explanatory memorandum states that: “it is obvious that employers (except in exceptional situations) do not make donations to their employees. At the same time, it is obvious that remuneration for work can take not only a monetary form, but also a form of various types of benefits, which, even if not included in the employment contract, are in practice perceived as part of it. If, however, it happens that the employer really wants to give a gift to a specific employee, e.g. on the occasion of an employment anniversary, he gives him a watch, then this benefit should be treated as subject to the Act of 28 July 1983 on inheritance and gift tax.“
Taking into account the conclusions contained in the above-mentioned judgment, it should be concluded that we can indicate a gift from the employer to an employee only in the case of a special gift/benefit, usually in connection with an important event in the company or in the context of a given employee – such as an anniversary, professional success, birthday, child, etc.
Thus, such an award, as a rule, constituting an exceptional and non-equivalent benefit (not related to performance at work), will constitute a gift subject to inheritance and gift tax, and thus will not constitute income from the employment relationship of a given employee.
Such an interpretation of these provisions is indicated by numerous positions of the Director of the National Tax Information in individual interpretations of:
- 12 June 2017 (file reference number 0111-KDIB2-2.4011.51.2017.2.JW);
- 9 March 2018 (file reference number 0112-KDIL3-1.4011.23.2018.2.AA);
- 10 May 2018 (file reference number 0114-KDIP3-2.4011.172.2018.1.AK1);
- 11 October 2018 (file reference number 0115-KDIT2-2.4011.340.2018.1.MD);
- 4 January 2022 (file reference number 0113-KDIPT2-3.4011.890.2021.3.GG);
- 4 April 2022 (file reference number 0112-KDIL2-1.4011.1170.2021.3.AMN);
- 11 July 2022 (file reference number 0113-KDIPT2-3.4011.295.2022.2.KK);
- 24 November 2022 (file reference number 0113-KDIPT2-3.4011.719.2022.2.KKA);
- 30 January 2023 (file reference number 0114-KDIP3-1.4011.1055.2022.1.LS);
- 27 February 2023 (file reference number 0113-KDIPT2-3.4011.61.2023.1.MS);
- 12 May 2023 (file reference number 0113-KDIPT2-3.4011.189.2023.1.GG);
- 28 August 2023 (file reference number 0113-KDIPT2-2.4011.501.1.2023.1.AKU);
- 13 April 2023 (file reference number 0114-KDIP3-1.4011.144.2023.3.AK);
- 6 October 2023 (file reference number 0112-KDIL2-1.4011.700.2023.1.AK);
- October 13, 2023 (file reference number 0111-KDIB2-2.4015.99.2023.5.MM).
Nota bene, it can be pointed out that, of course, it will be different in the case of awarding prizes for a specific project or for the effects of work. Such an award, as strictly related to the business relationship, would be taxed with PIT as standard.
And what about the inheritance and gift tax on a gift given to an employee? Taxation is subject to the acquisition from a single seller of property and property rights with a pure value exceeding PLN 5,733 – for purchasers included in the third group. This means that donations up to PLN 5,733 are exempt from taxation.
At the same time, for buyers from the third tax group, the tax will amount to 12 percent up to the threshold of PLN 11,833. If the amount of inheritance or donation or their equivalent is between PLN 11,833 and PLN 23,665, the tax will amount to PLN 1,420 plus 16% of the surplus over PLN 11,833. If the value of the inheritance exceeds PLN 23,665, the tax will amount to PLN 3,313.2 plus 20% of the surplus over PLN 23,665.
Importantly, after receiving the award treated as a donation, the employee will be obliged to submit the SD-Z3 form to the Head of the Tax Office competent for him/her within one month from the date of its receipt.
