New Year's gifts for employees' children: how to arrange and pay taxes

On the eve of the New Year, many employers buy gifts for their employees' children. But buying gifts is only half the battle; they still need to be properly accounted for and taxes paid. Read about how to do this in this article.

Documentation of gifts from the employer

Before you buy gifts, you need to issue an Order for the issuance of children's gifts. In this order, you need to specify who will receive the gifts: the child's parent (your employee) or the child personally. Depending on the recipient, the wording in the order may be as follows:

• "Give New Year's gifts to employees who have children" - in this case, you will need to indicate the employee's name in the gift distribution sheet. This option is more convenient and simple, because when you display gifts in the reporting, you already have all the information about employees (their TIN).
• "Give New Year's gifts to employees' children" - in this case, you will need to indicate the names of the children in the gift distribution list. This option will complicate your reporting a bit, as you will need to collect the children's TINs.

In the order, you must specify the maximum age of the child to whom you will give gifts. Most often, it is 18 years old, because from the point of view of the law, people over 18 are no longer considered children.

Once you have drawn up the order, you need to count the number of children and make an estimate for the purchase of gifts.

The next step is to purchase gifts and give them out. Gifts must be issued against a signature. To do this, you need to draw up a list of gifts in any form and indicate the names of all recipients.

After the gifts have been distributed, you need to draw up an Act of Write-off of Children's Gifts.

Taxation of gifts from the employer

If the value of the gift does not exceed 25% of the minimum wage (the minimum wage as of January 1 of the current year is taken into account), then personal income tax and military duty are not accrued and paid.

In 2020, the employer may not impose personal income tax and social security on intangible gifts worth up to UAH 1180.75.

Please note! If an employee has two or more children or the employer presents a gift to the employee's child and the employee, the value of the gifts received by one employee is summed up. That is, if the employer gives gifts worth, for example, UAH 600, and the employee has two children, the total value of the gifts will be UAH 1200. In this case, the total value of gifts received by one employee from the employer exceeds the minimum tax-free amount of UAH 1180.75. Anything above this amount will be subject to personal income tax (18%) and social security (1.5%).

After you give out the gifts, you will need to show them in section 1 of the 1-DF report. For gifts worth up to UAH 1180.75, the income characteristic is "160". For the amount exceeding UAH 1180.75, the income indicator is "126". In section 2, show the full value of the gifts.

If you give gifts to children under 18 years of age (regardless of whether the child or the parent receives the gift), you do not need to accrue and withhold the unified social contribution. If you accidentally or intentionally give a gift to a child over 18 years of age, you will need to accrue and withhold the unified social tax on the full value of such a gift.