New Year’s Gifts for Employees and Their Children: Taxes, Unified Social Contribution (USC), VAT, Documentation, and Accounting

A company or a Sole Proprietorship acting as an employer may give New Year’s gifts to employees, gift certificates, or separate gifts to employees’ children. In 2026, the tax-free threshold for non-cash gifts is UAH 2,161.75 per individual per month. Within this amount, personal income tax and military levy are not payable. The excess amount is subject to personal income tax at 18%, applying the non-cash income gross-up coefficient, and military levy at 5%. Cash gifts do not qualify for this exemption and are taxable in full.

The Unified Social Contribution (USC) and VAT must be considered separately. As a general rule, New Year’s gifts to current employees are included in the USC contribution base at their full value, regardless of the personal income tax exemption threshold. By contrast, the value of holiday gifts for employees’ children is expressly included in the list of payments exempt from USC. For VAT payers, transferring gifts free of charge generally constitutes a supply and creates VAT liabilities. Therefore, when arranging New Year’s gifts, it is essential to determine in advance who the actual recipient is — the employee or their child — and prepare the primary documents accordingly.

New Year’s gifts for employees: what can an employer give?

Employee gifts may include:

• goods or ready-made gift sets;

• products manufactured by the company;

• gift certificates;

• event tickets;

• money.

For tax purposes, cash and non-cash gifts are treated differently. The exemption under subparagraph 165.1.39 of the Tax Code of Ukraine applies only to non-cash gifts. Therefore, if an employer pays an employee UAH 2,000 in cash «for a gift» instead of providing a gift set, the payment does not become tax-exempt merely because it is intended for a holiday.

For personal income tax purposes, a gift certificate may be treated as a non-cash gift. The State Tax Service expressly applies the same tax-free threshold of 25% of the minimum wage to gift certificates.

No separate license is required merely to distribute ordinary food or non-food gifts to employees free of charge. However, alcohol, tobacco products, and other goods subject to special circulation rules should not be treated as ordinary gift sets: separate licensing, excise tax, labeling, and distribution restrictions apply.

Who should be recorded as the gift recipient: the employee or the child?

How a gift is documented affects not only the list of recipients but also the taxes payable.

Subparagraph 165.1.39 of the Tax Code of Ukraine establishes a threshold per taxpayer per month, not a separate threshold for each box or gift set. The State Tax Service also explains that if gifts are received in different months, the exemption threshold applies separately to each month.

If a child is designated as the gift recipient, the fact that one of the parents signs the distribution register does not turn that income into the parent's income. Under the Civil Code, parents and adoptive parents are legal representatives of their young and minor children.

However, the documents must reflect the actual circumstances. A child should not be formally listed as the recipient if the gift is actually a personal reward for an employee.

New Year’s gifts for children under 14: is there a separate tax exemption?

The Tax Code does not establish a separate tax-free threshold specifically for New Year’s gifts to children under 14. The age of 14 may be used as an internal criterion in an employer’s gift program. For example, a company may decide to give gifts to employees’ children who have not reached the age of 14 by a specified date.

Under the Civil Code, a person under 14 is considered a young child. Parents are their legal representatives, so a father, mother, or another legal representative may sign the distribution register when a gift is given to a child.

Therefore, the phrase «New Year’s gifts for children under 14» does not itself create an additional tax exemption. The general rules on non-cash gifts apply to personal income tax and military levy, while a specific USC exemption applies to holiday gifts for employees’ children.

How to document New Year’s gifts within a company

Ukrainian legislation does not prescribe a mandatory standardized form for an «order on New Year’s gifts» or a «gift distribution register». However, every business transaction must be supported by primary documents. Article 9 of the Accounting Law requires primary documents to record information about completed business transactions.

A practical set of documents for a company may include:

1. An order or directive issued by the manager. It is advisable to specify the purpose of distribution, recipient categories, types of gifts, distribution date, responsible persons, and funding source. For children's gifts, any age criterion adopted by the company should be stated from the outset.

2. A list of recipients. If employees receive the gifts, their details should be recorded. If the recipients are children, each child must be individually identified. For tax reporting, sufficient information is needed to identify the individual in Form 4DF.

3. Purchase documents. A contract, invoice, delivery note, receipt, or VAT invoice, depending on the supplier and buyer status.

4. Documents confirming receipt of the gifts into inventory at the warehouse or as company inventories.

5. A distribution register or handover certificate. It should specify the recipient, gift description, quantity, date, and signature of the recipient or the child’s legal representative.

6. An inventory write-off document prepared after the gifts have been transferred to recipients. The document may have a different name; what matters is that it records the nature, quantity, and value of the transaction and contains the required particulars of a primary accounting document.

A separate cost estimate is not a universal mandatory requirement for an ordinary private company. It may be prepared for internal budgeting purposes.

Tax-free value of New Year’s gifts for personal income tax and military levy

From January 1, 2026, the minimum wage is UAH 8,647. Therefore: 8,647 × 25% = UAH 2,161.75.

This is the maximum tax-free value of non-cash gifts per individual per month.

For personal income tax on non-cash income, the coefficient established by paragraph 164.5 of the Tax Code of Ukraine applies. At a personal income tax rate of 18%, it is: 100 ÷ (100 − 18) = 1.219512.

This coefficient applies specifically to the calculation of the personal income tax base. It is not applied to the military levy.

Example: taxation of a gift certificate

The State Tax Service provides the following example: a company gave an individual a gift certificate with a face value of UAH 3,000.

Tax-free portion — UAH 2,161.75.

Taxable portion: 3,000 − 2,161.75 = UAH 838.25.

UAH 838.25 is the excess amount to which the personal income tax and military levy rules apply.

State Tax Service clarification on a gift certificate worth UAH 3,000

If an employee has two or more children

The value of all children's gifts should not automatically be combined and treated as the income of one employee. The outcome depends on who is actually and formally designated as the income recipient.

For example, a company gives each of an employee's two children a gift worth UAH 1,800. Each child is listed separately as the recipient, and the parent signs the register only as a legal representative. Each child receives non-cash income of UAH 1,800, which does not exceed UAH 2,161.75.

A different situation arises if the order states «give the employee one set for each child» and the employee is listed as the recipient of all the sets. If the employee receives two sets worth UAH 1,800 each in one month, their total gift income is UAH 3,600. The tax-free threshold for that employee for the month remains UAH 2,161.75.

USC on gifts to employees

The tax-free threshold of UAH 2,161.75 applies to personal income tax and military levy, but does not determine the USC contribution base.

One-off employee incentives unrelated to specific work results, including non-cash incentives for holidays, anniversaries, and commemorative dates, are included in the payroll fund under the Instruction on Wage Statistics. Law No. 2464-VI includes wages and other incentive and compensation payments, including non-cash benefits, in the USC contribution base. Therefore, as a rule, a gift to a current employee is subject to USC on its full value, not just the portion exceeding UAH 2,161.75. The general employer USC rate is 22%, unless the law sets a different rate for the particular employee.

Consequently, a gift to an employee worth UAH 2,000 may be fully exempt from personal income tax and military levy but still be subject to USC.

USC on New Year’s gifts for employees’ children

A different rule applies to children. Paragraph 8 of the List approved by Cabinet of Ministers Resolution No. 1170 expressly excludes the value of holiday gifts and tickets to entertainment events for employees’ children from payments subject to USC.

Therefore, the company's documents should clearly establish that the gift is a holiday gift for an employee's child rather than an additional reward for the employee.

If a gift is given to a former employee who is no longer in an employment relationship with the company, its value is not included in the USC base solely because the person was previously an employee. The State Tax Service links USC liability on such gifts to the existence of an employment relationship.

VAT on free distribution of New Year’s gifts

For a VAT-registered company, giving gifts free of charge raises a separate issue from personal income tax and USC.

The State Tax Service confirms that the free transfer of goods to employees by a VAT payer is subject to VAT. For a purchased gift, the VAT base cannot be lower than its purchase price. For self-manufactured products, the VAT base cannot be lower than the ordinary price.

For example, a company purchases a gift for UAH 1,200 and gives it to an employee free of charge. The fact that the employee pays nothing does not automatically mean no VAT is due: the minimum VAT base is determined by reference to the purchase price.

If the company itself received the goods free of charge and their actual purchase price is zero, the State Tax Service explains that the VAT base for a subsequent free transfer of those goods may also be zero.

For an ordinary free transfer, the State Tax Service also requires VAT invoices to be prepared in accordance with the minimum tax base rules and registered in the Unified Register of VAT Invoices (URVI).

If the employer is not registered for VAT, distributing a gift does not create VAT liabilities for that employer.

Corporate income tax and accounting for gifts

For a company subject to corporate income tax, the starting point is its accounting financial result, followed by the adjustments prescribed by the Tax Code.

Subparagraph 140.5.10 of the Tax Code of Ukraine provides for an increase in the financial result when goods are transferred free of charge to certain categories of non-taxpayers, but excludes individuals who are subject to personal income tax. Therefore, an ordinary free gift to an employee or another individual subject to personal income tax does not, in itself, trigger this adjustment under subparagraph 140.5.10.

In accounting, gifts purchased for subsequent distribution are recorded as inventories until they are handed over, in accordance with Ukrainian National Accounting Standard NP(S)BO 9. The transfer to the recipient is documented with a primary accounting document, and the cost of the inventory is recognized as the relevant expense. If a gift to an employee qualifies as a payment included in the payroll fund, the accounts must also reflect the corresponding payroll costs and USC. The specific subaccounts depend on the purpose of the expenses and the company's approved accounting policy.

Legislation does not establish one universal accounting entry suitable for gifts to employees, gifts to employees' children, promotional gifts, and gift certificates alike. It is therefore important to determine the economic substance of the transaction first and select the appropriate accounting accounts afterward.

How to report New Year’s gifts in tax returns

Gift income must be reported individually in the relevant Appendix 4DF to the Tax Calculation. If the recipient is an employee, the employee's details are reported. If the recipient is a child, the child must be identified in the report, even if a parent physically collected and signed for the gift as the legal representative.

The current Form 4DF provides for identification of individuals by their Ukrainian taxpayer registration number (RNOKPP), or by passport details under conditions established by law. It is therefore advisable to collect the information required to identify children before the reporting deadline.

New Tax Calculation forms approved by Ministry of Finance Order No. 243, as subsequently amended, have applied since July 17, 2026. Legal entities submit the Tax Calculation monthly, within 20 calendar days after the end of the reporting month. Sole Proprietorships and individuals engaged in independent professional activities who act as tax agents report quarterly, with a monthly breakdown, within 40 calendar days after the end of the quarter.

The income code should be selected using the current Directory of Income Codes for Individuals in Appendix 2 to Procedure No. 4. This is particularly important for accounting templates created before the new forms were introduced in summer 2026.

Is an ECR or PECR required when distributing gifts to employees?

The ECR Law links the use of an ECR/PECR to a payment transaction — accepting cash, a payment card, or another legally recognized means of payment for goods or services.

If a company simply gives an employee or an employee's child a gift free of charge, with no payment received at the time of distribution, the company does not accept funds from the recipient. Such a handover is not, in itself, a typical payment transaction for the purposes of Law No. 265/95-VR.

A different situation arises when a gift certificate is used to pay for goods. The State Tax Service requires the purchase paid for with a gift certificate to be processed through an ECR/PECR for the full purchase amount. The fiscal document indicates a non-cash payment method, and the payment type may be specified as «gift certificate». If the certificate covers only part of the purchase, the receipt must show multiple payment methods and the respective amounts.

Therefore, an employer giving an employee a gift certificate free of charge and the employee subsequently using it to pay at a store are two different transactions, and their tax and cash register implications must be considered separately.

Special rules for children’s New Year and Christmas gifts

Law of Ukraine No. 2117-III on New Year and Christmas celebrations for children remains in force. It applies annually from November 15 to January 15 and provides special rules for children's gifts and funding sources specified by the law.

For the purposes of this particular law, a «children's holiday gift» is a set containing only:

• confectionery;

• domestically manufactured toys;

• fruit.

The total value of such a set may not exceed 8% of the subsistence minimum for an able-bodied person established on January 1 of the relevant year. In 2026, that subsistence minimum is UAH 3,328, so the special gift limit under Law No. 2117-III is: 3,328 × 8% = UAH 266.24.

This special law should not be confused with the general Tax Code rule for non-cash gifts worth up to UAH 2,161.75. Law No. 2117-III applies only to the funding sources and categories of transactions specified in it. In particular, its special VAT exemption concerns sales of children's holiday gifts purchased using funds from trade union committees and other expressly designated non-profit organizations. An ordinary commercial company buying gifts for employees' children using its own funds does not receive this special exemption simply because the gifts are described as New Year's gifts.

Accounting for employees’ New Year’s gifts in Torgsoft: inventory write-offs and gift certificates

For physical gifts, Torgsoft offers the «Writing Off Goods from Inventory» function. Goods can be added to the write-off document by scanning a barcode or selecting them manually from warehouse stock. The document displays the product name, barcode, SKU, quantity, retail price, cost, and remaining stock. This makes it possible to record the actual removal of gift items from inventory and monitor their cost.

If a company uses gift certificates, Torgsoft provides a separate feature under «Marketing → Gift Certificates». The software allows you to issue certificates with unique barcodes, sell and reissue them, and use them to pay for goods and services. Certificate transactions can be recorded with the corresponding payment details in sales documents.

A Torgsoft inventory document may confirm an internal stock movement or write-off, but it does not replace the order establishing the corporate gift program, the individually identified distribution register, the accounting calculation of personal income tax, military levy and USC, or submission of Form 4DF. These documents and tax calculations must reflect the actual gift recipient.

Main tax risks when giving gifts to employees

The most common risks arise not from the possibility of giving employees New Year's gifts, but from incorrectly determining the recipient or the applicable tax treatment.

Companies should monitor the following situations:

• several gifts given to one employee during the same month are incorrectly treated as separate tax-free income amounts;

• gifts are actually given to employees but documented as children's gifts solely to avoid USC;

• a cash payment is incorrectly classified as a non-cash gift;

• USC is not charged on a gift to a current employee;

• a VAT payer writes off gifts without checking VAT liabilities under Articles 185 and 188 of the Tax Code;

• a child's income is reported under a parent's taxpayer registration number;

• no proper fiscal receipt is generated when goods are paid for with a gift certificate;

• the accountant uses an outdated Tax Calculation form or old Form 4DF settings.

Violations of the rules for withholding and paying personal income tax and military levy are subject to liability under the Tax Code; violations of USC calculation and payment rules are governed by Law No. 2464-VI; and failure to process a legally required payment transaction through an ECR/PECR is subject to financial penalties under Article 17 of Law No. 265/95-VR.

What to check before purchasing gifts

Before buying New Year’s gifts, a company should determine:

1. Who will receive the gifts — employees, their children, or both.

2. Who is legally the recipient of each gift.

3. The age criterion for children's gifts, if the company applies one.

4. The value of the gift per recipient and the value of any other gifts received by that person in the same month.

5. Whether the gift is non-cash.

6. Whether USC is payable.

7. Whether the company is registered for VAT.

8. Which personal details are needed for Form 4DF.

9. Whether gift certificates will be used and whether their subsequent redemption requires fiscalization.

10. Which primary documents will support the purchase, distribution, and write-off of the goods.

This approach enables a company to determine the actual cost of its corporate gift program before distributing gifts, taking into account not only purchase prices but also USC, VAT, and taxes on individuals' income.

Official sources

Tax Code of Ukraine dated December 2, 2010, No. 2755-VI — paragraph 164.5, subparagraph 165.1.39, Articles 167–168, paragraph 176.2, paragraphs 185.1 and 188.1, subparagraph 140.5.10, subsection 10 of Section XX.
Tax Code of Ukraine — official text

Law of Ukraine «On the State Budget of Ukraine for 2026» dated December 3, 2025, No. 4695-IX — Articles 7 and 8: subsistence minimum and minimum wage.
Law on the State Budget of Ukraine for 2026

Law of Ukraine «On the Collection and Accounting of the Unified Contribution for Compulsory State Social Insurance» dated July 8, 2010, No. 2464-VI — Articles 7 and 8.
Law No. 2464-VI on USC

Resolution of the Cabinet of Ministers of Ukraine dated December 22, 2010, No. 1170 — paragraph 8 of the List: holiday gifts and entertainment event tickets for employees' children are not subject to USC.
Cabinet of Ministers Resolution No. 1170

Instruction on Wage Statistics, approved by State Statistics Committee Order No. 5 dated January 13, 2004 — subparagraph 2.3.2 and Section 3 concerning the composition of the payroll fund.
Instruction on Wage Statistics No. 5

Order of the Ministry of Finance of Ukraine dated January 13, 2015, No. 4 — current Tax Calculation and Form 4DF templates and the procedure for completing them.
Ministry of Finance Order No. 4 and the current Tax Calculation form

Order of the Ministry of Finance of Ukraine dated May 7, 2026, No. 243 — revised Tax Calculation forms and their submission procedure.
Ministry of Finance Order No. 243

Law of Ukraine «On Accounting and Financial Reporting in Ukraine» dated July 16, 1999, No. 996-XIV — Article 9 on primary accounting documents.
Accounting Law No. 996-XIV

Ukrainian National Accounting Standard NP(S)BO 9 «Inventories», Ministry of Finance Order No. 246 dated October 20, 1999 — inventory accounting rules.
NP(S)BO 9 «Inventories»

Ukrainian National Accounting Standard NP(S)BO 16 «Expenses», Ministry of Finance Order No. 318 dated December 31, 1999 — expense recognition rules.
NP(S)BO 16 «Expenses»

Instruction on the Application of the Chart of Accounts, Ministry of Finance Order No. 291 dated November 30, 1999.
Instruction No. 291 on Applying the Chart of Accounts

Law of Ukraine «On the Use of Electronic Cash Registers in Trade, Catering, and Services» dated July 6, 1995, No. 265/95-VR — Articles 2, 3, and 17.
Law No. 265/95-VR on ECR/PECR

Law of Ukraine «On Tax Exemption for Funds Allocated to New Year and Christmas Celebrations for Children and the Purchase of Children's Holiday Gifts» dated November 30, 2000, No. 2117-III — Articles 2–4.
Law No. 2117-III on Children's New Year and Christmas Gifts

Civil Code of Ukraine dated January 16, 2003, No. 435-IV — Articles 31 and 242 concerning children under 14 and legal representation by parents.
Civil Code of Ukraine