Birthday Gifts For Employees Are Not Subject To UST
Many commercial organizations give birthday gifts to their employees. However, the celebration may be dampened by the tax inspection.
In a recent case, an organization recorded gifts given to employees as an expense “for creative and enterprising approach to work responsibilities.” Tax inspectors decided that this wording signifies that the gifts were part of payment for labor and, thus, subject to Unified Social Tax (UST). The court did not accept this argument and pointed out that material incentives such as birthday gifts are not covered by legislation, nor by the "Regulation on Bonuses." This means that, in this situation, gifts may not be considered a reward for specific work achievements and are not subject to UST. This is according to resolution # А19-14863/07-20-Ф02-728/08 of the Federal Arbitration Court of East-Siberian region from March 5, 2008.
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