Children’s New Year Gifts from a Sole Proprietor: Documents and Tax-Free Reporting

A sole proprietor on the simplified tax system who is not registered for VAT may buy ordinary tangible gifts with personal funds and give them free of charge to adult employees for their children ahead of New Year. If the combined ordinary value of all non-cash gifts from this sole proprietor to one employee during a month in 2026 does not exceed UAH 2,161.75, personal income tax and the military levy are not assessed or paid on them. The unified social contribution (USC) is not assessed on holiday gifts for employees’ children purchased at the employer’s expense.

Before buying, calculate each employee’s remaining limit. Document the goods’ intended use for children, keep the purchase documents, and record acceptance of the gifts. In this scenario, the employee is the recipient. The employee’s gift income is reported in FIZ-4DF with income code “160” as part of the sole proprietor/self-employed person’s quarterly Calculation.

Calculate the available amount before purchasing

Subparagraph 165.1.39 of the Tax Code of Ukraine exempts non-cash gifts from personal income tax up to 25% of the minimum wage as of 1 January of the reporting year, per month. For 2026: 8647 × 25% = UAH 2,161.75. This portion of income is also exempt from the military levy.

Choose ordinary personal-use or household goods. Cash does not qualify for this exemption. Do not include gift certificates in the procedure described here.

In the budget list, enter for each employee the value of any earlier non-cash gifts from this sole proprietor during the month. Subtract that amount from UAH 2,161.75. If you give an employee several sets for their children, compare their combined ordinary value with the remaining limit.

Keep records of the goods’ prices and your own calculation of each set’s value. Use ordinary prices for tax valuation; account separately for the inventory’s cost value. If a planned gift exceeds the available balance, change the set’s contents or value before buying. Any excess is taxed as an additional benefit.

Identify the employee as the gift recipient

A gift involves transferring property to the recipient free of charge and into their ownership. In this procedure, the employee accepts the property, and ownership arises upon acceptance. State separately that the gift is intended for the children. In personalized reporting, this is the employee’s income.

For the sole proprietor’s decision, use wording such as: “Transfer ownership of New Year gifts for their children to the employees listed, free of charge.” Repeat the intended use in the issuance record. The employee signs it as the recipient.

A gift agreement for personal-use and household items may be oral. However, tax reporting figures must be supported by documents: paragraph 44.1 of the Tax Code of Ukraine prohibits using data that is not documented.

Document the purchase and distribution

Organize the process using this plan. The names and contents of the sole proprietor’s own documents below are practical recommendations for documenting the transaction.

1. Prepare the sole proprietor’s decision. State the holiday, the gifts’ intended use for children, eligibility criteria, the selected age range, goods, budget, distribution deadline, and person responsible.
2. Prepare the budget list. Include employees, number of sets, information needed to apply the selected criteria, earlier gifts during the month, and the remaining limit.
3. Buy the goods. Keep supplier documents showing the names, quantities, and prices of the goods, along with proof of payment. Reconcile the quantity received with the purchase.
4. Prepare your own distribution act or record. State the document’s title and date, the sole proprietor’s details, the employee’s full name, goods, quantity, value, intended use for the children for the holiday, acceptance date, and the recipient’s and responsible person’s signatures.
5. Reconcile the totals. Compare the goods purchased and distributed. Record any sets that were not distributed. Give the documents and each employee’s income calculation to the person preparing the tax report.

Keep evidence supporting the non-assessment of USC

Paragraph 8 of Section II of List No. 1170 excludes the cost of holiday gifts for employees’ children from the USC base. Paragraph 3.23 of Instruction No. 5 classifies such gifts as payments outside the payroll fund. The State Tax Service also explains that USC is not assessed on gifts provided to employees for their children ahead of New Year.

State the holiday purpose for children explicitly in the decision, list, and distribution document. Keep records that support this purpose. The basis for not assessing USC applies specifically to gifts for employees’ children purchased at the employer’s expense.

The special relief under Article 3 of Law No. 2117-III applies to gifts received by children from institutions and organizations defined in Article 1 of that Law. An ordinary sole proprietor who buys goods independently and gives them to employees does not automatically qualify for it. For the transaction described here, use subparagraph 165.1.39 of the Tax Code of Ukraine.

Collect only the personal data you need

State in the sole proprietor’s documents the purposes for processing data: organizing gifts, documenting distribution, and meeting tax obligations. Select the appropriate legal basis for each purpose. The law allows, among other grounds, consent, performance of a legal transaction, and compliance with a statutory obligation.

Collect only the data needed for these purposes. Do not automatically attach copies of birth certificates: the data-minimization requirement does not impose such an obligation. Use the employee’s taxpayer registration number (RNOKPP) for reporting. Passport details may be used for a person who has officially refused a number on religious grounds and has the relevant mark.

When collecting data directly from an employee, inform them of the data controller, the scope and content of the data collected, the purpose, their rights, and the people to whom the data will be transferred. If you obtain the child’s personal data from the employee, provide the same information to the child through their legal representative within 30 working days of collection, except where the law provides otherwise. Limit access to the documents to people carrying out the relevant tasks. The sole proprietor is personally responsible for protecting personal data.

Report the gift in FIZ-4DF

Report a tax-exempt gift using income code “160.” Enter the accrued income in column 3a regardless of whether it has been distributed; enter the amount actually provided in column 3. If accrual and distribution occur in the same month, the amounts in these columns are the same. Report gift income separately from income under other codes.

Submit the sole proprietor/self-employed person’s Calculation with FIZ-4DF to the place of primary registration for the quarter, broken down by month, within 40 calendar days after the quarter’s last day. If the deadline falls on a weekend or public holiday, it moves to the next business day. For December, enter quarter IV and month number “3” within the quarter.

Illustrative example: ten sets at UAH 2,000 each

Suppose a sole proprietor on the simplified tax system and not registered for VAT buys ten board-game sets with personal funds. The purchase price and ordinary value of each set is UAH 2,000. In December 2026, the gifts are accrued and given to ten adult employees, one set each for their children aged 6–12. Those employees received no other non-cash gifts from this sole proprietor in December. All have RNOKPP numbers; the gifts’ purpose for children and acceptance are documented. The figures are illustrative and show how to calculate the amounts.

For ten gift entries, submit the Calculation electronically: paper filing is allowed if the number of rows in the appendices does not exceed five. Do not deduct the purchase costs from income when determining the simplified-tax base. For Group 3, the single tax is calculated as a percentage of income.

Print a gift write-off act in Torgsoft

If you keep records of gift goods in Torgsoft, you can print an act for documenting the warehouse write-off at cost or retail prices. To reconcile the value of written-off inventory, select an act at cost.

Compare the act with the purchase documents and the signed distribution record. Determine the value of the employee’s income for tax purposes and their remaining monthly limit separately. Printing is described in the “Списання товару” (Goods Write-off) section.

Keep documents for tax reporting

Collect the decision, budget list, purchase documents, limit calculation, and distribution act or record in one tax-reporting file. For sole proprietor documents not covered by subparagraphs 44.3.1–44.3.2 of the Tax Code of Ukraine, the minimum retention period under subparagraph 44.3.3 is 1,095 days. The period starts from the filing of the report for which the documents were used or, if it was not filed, from its filing deadline.

The period is extended for any suspension of the limitation period in the cases set out in paragraph 102.3 of the Tax Code of Ukraine. Keep documents related to an audit and an appeal against its results until the audit ends, the appeal period expires, and/or the court resolves the case, but for no less than the minimum period under paragraph 44.3. For primary documents, also apply the note to Article 186 of List No. 578/5, referenced by Article 336: retain them for one year after the statutory deadline for judicial challenge of the audit decision; if challenged in court, for one year after the judgment concluding the case takes legal effect; if that judgment is appealed, for three months after the final judgment that cannot be appealed takes legal effect. The minimum retention period must also be satisfied in every case.

Official sources

• Tax Code of Ukraine No. 2755-VI: paragraphs 44.1, 44.3, 44.4, 49.20, 70.12, 292.1, 293.1; subparagraphs 49.18.2 and 165.1.39; subparagraph “b” of paragraph 176.2; subparagraph 1.7 of paragraph 16¹ of subsection 10 of Section XX.
• Law “On the State Budget of Ukraine for 2026” No. 4695-IX: Article 8.
• Civil Code of Ukraine No. 435-IV: part 1 of Articles 717, 719, and 722; Article 242.
• Resolution of the Cabinet of Ministers of Ukraine No. 1170 of 22 December 2010: paragraph 8 of Section II of the List.
• Instruction on Wage Statistics, Order No. 5 of 13 January 2004: paragraph 3.23.
• State Tax Service guidance on USC for gifts provided to employees for their children ahead of New Year.
• Ministry of Finance Order No. 4 of 13 January 2015: Procedure, Section I, paragraphs 6–11; Section II, subsection 2, paragraph 4; Section III, subsection 2, paragraph 2; Appendix 2, code “160.”
• State Tax Service guidance on non-cash gifts and code “160” in FIZ-4DF.
• Law “On Personal Data Protection” No. 2297-VI: Articles 6 and 11; part 2 of Article 12; parts 1 and 4 of Article 24.
• Law No. 2117-III on tax exemptions for funds for children’s New Year and Christmas celebrations and gifts: Articles 1 and 3.
• Ministry of Justice Order No. 578/5, List, paragraphs 1.4 and 2.11, Article 336 and the note to Article 186 — official act.