Tax rules for gifts and entertainment during the festive season
As the festive season approaches, many companies take the opportunity to show their appreciation to employees and clients by giving Christmas gifts or hosting a Christmas lunch or party. However, there are several rules to be aware of to ensure correct tax treatment, to secure the deductibility of gift-related costs, and to avoid any risk of taxable benefits for recipients.
Christmas gifts for employees
For the 2025 tax year, the tax-free allowance for Christmas gifts to employees is SEK 550 including VAT. Costs relating to postage and administration are not included in this limit and may be paid separately. To qualify for tax exemption, the gift must be offered to all employees or to a substantial group of them, and it can’t be given in the form of cash.
If the market value of the gift exceeds SEK 550 including VAT, the employee becomes liable to tax on the full value of the gift, and the employer must also pay employer’s National Insurance contributions on the entire amount. It’s important to note that the relevant value is the market value, meaning the amount the employee would pay privately for the same item. This means that if the item costs more than SEK 550 including VAT in the shops, it is taxable. Any discount negotiated by the employer is irrelevant; it is the market value, not the purchase price, that determines whether the gift is tax-free or taxable.
Donations to charity
In recent years it has become increasingly common for employers to donate money to charitable organisations instead of giving Christmas presents to employees. If the employee chooses which organisation receives the funds, this creates a taxable benefit for the employee, as they are deemed to have had control over the money. However, if the employer decides to donate an amount equivalent to the tax-free value of Christmas gifts to a charitable organisation, no taxable benefit arises.
Christmas parties or lunches for employees
A Christmas party or festive lunch for employees may be a deductible business expense if it falls within the two annual staff events for which employers are entitled to tax relief. The company may reclaim VAT on meal costs up to SEK 300 per person, although the meal cost itself is not tax-deductible. Ancillary costs (such as venue hire or entertainment) of up to SEK 180 excluding VAT per person may be deducted. Alumni, interns, retired employees and family members may also attend without affecting deductibility.
Christmas gifts or festive meals with clients
Client relationships are vital to any business, and many companies take the opportunity to invite clients to a festive lunch or send them a Christmas gift. There are no special tax deductions for Christmas gifts to clients, as such gifts are considered acts of personal generosity. Instead, the usual rules apply. If the gift qualifies as a business representation or promotional item, a deduction of up to SEK 300 excluding VAT is permitted.
For Christmas lunches or dinners with clients, the normal representation requirements must be met. There must be a direct connection in terms of timing, participants and location for the meal to qualify as business entertainment. If these criteria are met, deductions may be made under the applicable representation rules.
If you have any questions about Christmas gifts or festive business entertainment, we are here to help. Read more about our tax advisory services here.
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