Gift cards – gratuitous consideration or donation?
Granting a gift card to a customer, contractor or employee does not necessarily result in revenue from a free-of-charge benefit, and hence in a tax to be paid.
In a July tax ruling (0113-KDIPT2-3.4011.331.2018.1.GG), the Head of the National Revenue Information Service held that granting gift cards to employees at a company anniversary celebration event does not result in an obligation on the part of the petitioner to settle relevant income taxes for its employees as taxpayers.
According to the facts of the case, the anniversary gift was not a form of remuneration for work, as its granting had not been provided for in the company’s internal regulations, nor did the employees know in advance that they would receive such gifts.
The ruling at issue casts some new light on the taxation of gift cards; even where these are granted to recipients other than employees.
Following the line of argument adopted by the Head of the National Revenue Information Service, it may be argued that it is admissible for a taxpayer, in pursuing good relations with its contractors, to grant them gift cards without generating a risk of taxable revenue on their part.
A condition precedent for the above model to be applied here is that the campaign be organised properly, without the contractors being informed in advance of being eligible for gifts upon satisfaction of certain criteria. By way of example, the company should not inform the contractors of the conditions for being eligible for the ‘award’.
In the situation described above, the company becomes, following the line of argument adopted by the Head of the National Revenue Information Service, a donor and the contractor – a recipient. Therefore, according to the current regulations, the act on inheritance and gifts should be applied to such cases rather than the personal income tax.
However, what is important is the fact that the amount of gift and inheritance tax allowance is PLN 4,902 in the case of donations. As a result, a contractor receiving a gift card of up to PLN 4,902 is not required to pay any gift and inheritance tax or file a relevant tax return.
It should be noted that this applies to recipients that are individuals; where the recipient is a legal person, the income from a gift card will be taxable with corporate income tax.
As regards the implications for the donor on account of granting such a card, then under the act on corporate income tax, any expenses relating to a donation don not constitute tax deductible costs for a company.
Magdalena Walczyńska, Tax Consultant, ATA Tax Sp. z o.o.
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