Very often Romanian employers choose to offer various gifts to employees with the purpose of stimulating their performance, or simply for various social reasons. And the month of December with its Christmas holiday, also called by many the “month of gifts”, is the best occasion to offer such gifts to employees.
All the more so, as the tax treatment applicable in Romania to such benefits is a preferential one. More exactly, it can involve zero tax costs compared to other salary benefits.
What does the Romanian tax law say in what regards the applicable tax treatment for gifts granted to employees?
According to the Romanian tax legislation in force (art. 76, paragraph (4) letter a) of Law no. 227/2015 on the Tax Code), gifts granted to employees on the occasion of Christmas, Easter, June 1 or similar holidays of other religious denominations, as well as on the occasion of March 8 (Women’s Day), are exempt from income tax. This exemption is applied up to a value of 150 Lei for each person, on the occasion of each of the holidays listed above.
Update: Starting with December 18, 2021, when Emergency Ordinance no. 130/2021 was published, the government increased the non-taxable ceiling from 150 lei to the value of 300 lei per person. Therefore, this article was updated below according to the latest regulations.
Moreover, the same tax exemption treatment applies to gift vouchers offered to employees on these occasions, and which comply with the rules of the applicable law (Law no. 165/2018 on the issuance of vouchers). Therefore, Romanian employers can choose to offer gift vouchers instead of gifts, for which the same tax treatment applies.
Also, any gifts, including the gift vouchers, offered to the employees on the occasion of these holidays are exempt from mandatory salary social contributions, as per the provisions of art. 142 lit. b) of the Romanian Tax Code.
In conclusion, for such benefits offered to employees, neither income tax (10%), nor mandatory social contributions (25% contribution to pension fund and 10% health insurance contribution) are due by the employee. In addition, such benefits are also exempt from employer social contribution ( 2.25% labor insurance contribution).
The situations in which you can benefit from the preferential tax treatment
For a better clarity, we describe below the situations in which the tax treatment applicable to gifts granted to employees is a favorable one, as specified above. Thus, the following are exempt from both income tax and mandatory social contributions:
What happens if the value of the gift exceeds 300 Lei?
According to the provisions of the same Romanian Tax Code, in case the value of the gift offered exceeds the amount of 300 Lei, the difference in value will have to be taxed accordingly. Specifically, if an employer offers all its employees Christmas gifts worth 330 Lei each, then the difference of 30 Lei from the non-taxable threshold of 300 lei up to the total value will represent a taxable benefit in kind for each employee.
The tax treatment applicable to the amount of 30 Lei is the same as that applicable to any taxable salary income. More exactly, the benefit is subject to both income tax and social contributions which are due by the employee and employer.
We remind you that, in the case where gift vouchers are granted to employees, the provisions established by Law no. 165/2018 (regarding the granting of vouchers) must also be observed.
Tax treatment at the company level
At the same time, from the perspective of company taxation, gifts in cash or in kind, including gift vouchers offered to employees and their minor children, represent social expenses for the company. Expenses of social nature can be deducted from company’s profit tax calculation up to a percent of 5% of the total expenses with employee salaries (calculated as per the Romanian Labor Code’s provisions).
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