One of the most common year-end HR and accounting topics is the distribution of New Year and Christmas gift packages to employees’ children. This article explains when such gifts are tax-exempt, what the legal conditions are, what the non-taxable threshold is, and what documentation is required.
Legal Basis for Gift-Giving to Employees’ Children
Under Article 119 of the Labor Law of Serbia, employers may provide New Year and Christmas gifts to children of their employees, provided the children are under the age of 15.
The maximum non-taxable amount for such gifts is regulated by the Personal Income Tax Law.
For payments made until January 31, 2024, the tax-free amount per child is 12,544 RSD annually.
Conditions for Tax-Exempt Holiday Gifts
To qualify for tax exemption, all of the following conditions must be cumulatively met:
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The child must be the employee’s own child.
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The child must be younger than 15 years.
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The gift must be provided specifically for New Year or Christmas.
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The total annual value of all gifts received by a child for this purpose must not exceed the non-taxable threshold (12,544 RSD for 2023/2024).
If any of these criteria are not met, the value of the gift is treated as employee income, and the employer must calculate and pay income tax and mandatory social security contributions on the grossed-up amount.
When Gifts Are Taxable
Gift-giving is considered taxable income in the following cases:
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The gift is provided to a child of a business partner (not an employee’s child).
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The child is 16 years old or older.
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The gift is given for another occasion (e.g., starting school).
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The value of the gift exceeds the allowed threshold.
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The total value of two gifts in one calendar year exceeds the threshold (even if each gift separately does not).
Example: If a gift is provided in January 2023 and another in December 2023, their combined value is considered for that calendar year. If the total exceeds 12,544 RSD, the excess is taxable.
Practical tip: To avoid complications, employers may choose to postpone gifting until January 2024, so both gifts fall into different tax years.
Gift Form and Value – Employer’s Discretion
The employer may choose:
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the form of the gift (cash, vouchers, gift cards, toys, sweets),
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and the value of each gift.
The non-taxable threshold remains the same, regardless of the form in which the gift is provided. Note that the Labor Law does not oblige employers to provide gifts at all, nor does it specify a minimum gift value – it is entirely the employer’s choice.
If Both Parents Work at the Same Company
A common practical question is: If both parents work at the same company, does the child receive one or two gifts?
According to opinion no. 011-00-46/2010 issued by the Ministry of Labor and Social Policy, a child has the right to receive two gifts, one from each parent, as each parent individually holds employee rights.
Required Documentation for Holiday Gifts
To properly document the transaction, the employer should issue a Director’s Decision, which includes:
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a list of employee children receiving gifts,
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the form and value of each gift,
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the purpose (New Year or Christmas).
To prove the child-parent relationship, an extract from the child’s birth certificate may be used.
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