Christmas gifts for clients

If you want to prepare gifts for your business partners this year, you will certainly be interested in the tax deductibility rules for those gifts. 

From 2024, the rules changed for a traditional gift: still wine. It is now treated in the same way as sparkling wine or spirits. For VAT, an input deduction is available if the conditions are met; for income tax, it is a non-deductible expense.

VAT perspective – entitlement to input VAT deduction Income tax perspective – tax-deductible expense
  • total gift price up to CZK 500 (excluding VAT)
  • total gift price up to CZK 500 (excluding VAT)
  • must not be alcohol (including still wine from 2024)
Christmas gifts for employees

The exemption for gifts to employees has been abolished from this year. Previously, you could give an employee a gift worth up to CZK 2,000 without additional taxation. From 2024, it is no longer that simple.

If you simply give an employee a gift without a “social event”, its value is subject to income tax (15%) and social and health insurance contributions (7.1% and 4.5%). In effect, the gift’s value is taxed in the same way as a bonus.

However, if you give employees a Christmas gift at a Christmas party (i.e. a “social event organised by the employer”), the income is completely exempt for the employee. The only limitation is that the gift must be reasonable. 🙂

If you plan to give employees Christmas gifts this year, they will always be non-deductible expenses from your perspective.

Christmas parties

The costs of organising parties for business partners or employees are tax-deductible. In every case, however:

  • photographic documentation is important to demonstrate tax deductibility
  • food and drink costs are never tax-deductible

If an employee Christmas party is purely for entertainment, the costs of organising it are non-deductible.

Be careful about alcohol consumption at Christmas parties. There must not be a drop in the accounts. If alcohol will be served, employees must pay for it themselves, or a company shareholder must pay personally for everyone. If an inspection found alcohol in your accounts, it would assess advance income tax on its value (i.e. the company would have to pay 15% of the alcohol’s value to the tax office).

If you are unsure, do not hesitate to get in touch; we will certainly work it out together. 🙂