One of the common year-end topics concerns holiday gift packages for employees’ children. In certain circumstances, such gifts are tax-exempt, so below we outline the relevant rules, as well as the documentation required to properly support this transaction.

The possibility for an employer to provide New Year’s and Christmas gifts to employees’ children is regulated by the Labour Law. Specifically, Article 119 allows employers to give gifts to employees’ children up to 15 years of age. The value of the gift is limited to the non-taxable amount prescribed by the Personal Income Tax Law.

The non-taxable amount of gifts to employees’ children up to 15 years of age, for New Year’s and Christmas gifts paid no later than January 31, 2026, is 14,077 RSD per child per calendar year.

From this rule, we can extract the conditions that must be met cumulatively for the gift to be tax-exempt:

• The child receiving the gift must be the child of an employee of the company;

• The child must not be older than 15 years;

• The gift must be given on the occasion of New Year or Christmas;

• The total value of all gifts given to the child for this occasion within one calendar year must not exceed the non-taxable limit.

If any of these conditions are not met, the gift is treated as employment income and must be taxed accordingly. This means that tax on salaries and mandatory social security contributions—both employer and employee portions—must be calculated and paid on the grossed-up value of the gift that does not meet the prescribed requirements.

For illustration, in the following cases the prescribed conditions are not met and the gift cannot be considered tax-exempt:

• The company purchases a gift package for the child of its business associate/partner (the child is not an employee’s child);

• The company purchases a gift for the child of an employee who has turned 16 (age limit not met);

• The company purchases a gift on the occasion of the child starting school (occasion criterion not met);

• The company purchases a gift worth 20,000 RSD (value criterion not met);

• The company purchases a gift for a child in January 2025 and another in December 2025, and although neither exceeds the limit individually, their combined value exceeds the non-taxable amount for the calendar year (value criterion not met).

Employers who have already given gifts to employees’ children earlier in 2025—for example, for Christmas at the beginning of the year—and who decide to give New Year’s gifts again at the end of 2025 must add the values of both gifts, as they fall within the same calendar year. If the combined amount exceeds the non-taxable limit per child, taxes and contributions must be calculated and paid. In such a scenario, both gifts cannot be fully tax-exempt, even though they relate to holidays spanning 2024/2025 and 2025/2026. To avoid complications, employers may keep the previous year’s schedule and postpone the gift-giving to early January 2026.

Employers may choose to give New Year’s gifts in cash, gift cards or vouchers, sweets, toys, or similar items, and they may decide freely on the value of individual gifts. The law only prescribes the maximum non-taxable amount. The form of the gift (cash, toys, sweets, etc.) does not influence the tax treatment. It is also important to note that the Labour Law does not impose an obligation on employers to provide New Year’s or Christmas gifts, nor does it prescribe a minimum value; the decision is entirely at the employer’s discretion.

A frequent practical question is whether a child whose both parents work in the same company is entitled to one or two gift packages. This issue was clarified by the Ministry of Labour and Social Policy in its Opinion No. 011-00-46/2010, stating that a child whose both parents are employed by the same company is entitled to two separate gifts from the employer, since each parent is an employee and exercises individual employment rights.

A Director’s Decision must be prepared to document the holiday gift distribution. The decision should include all relevant details regarding the transaction: the list of employees’ children who will receive the gifts, the value of each gift, and the form of the gift. As evidence that the recipients are indeed employees’ children, an extract from the child’s birth registry may be used.