Since the outbreak, Germany has largely changed to a work-from-home model, and I rarely come to the office. During the last week before Christmas, a colleague invited me to work at the office for a day so that we could meet in the evening to say goodbye. I was happy to oblige.
I baked an apple cake over the weekend, packed it in a food box the night before, and took it with me before I left home in the morning. When I arrived at the office, I met a colleague I hadn't seen in a long time and was greeted warmly, showing the cake I had brought to show that I had come prepared for the day.
In the morning, there was a knock on the door and I looked up to see my boss walking in with his hands full. First he put down a cardboard tray full of delicate Christmas treats, beautifully tied with cellophane on the outside! He shook my hand, thanked me for my hard work and friendly cooperation throughout the year, and pointed to the paper plate of snacks, saying that it was a small token of his appreciation to wish me and my family a happy holiday.
Then he put down a pile of things in his other hand, a big thin rectangular cardboard box, a black bag and a white envelope. He said it was a gift from a partner company. This year our department introduced the company is developing a set of software, found a lot of problems, many times to give them feedback, I guess it is therefore to thank it. The supervisor said not only for me, other colleagues also have a share.
After the supervisor left, a colleague happened to come over, and the two of us were curious to open the gift from the partner company. Inside the big cardboard box was a 2022 calendar, a wildlife calendar issued by the animal protection organization WWF. It just so happened that I didn't have a calendar for next year, so I could keep it in my office. The white envelope contained a Christmas card, and the black bag was opened and turned out to be an Adidas sports bag with a small package of Christmas cakes and a small card underneath.
I picked up the card and there were two paragraphs written on it. The first paragraph said, "We send you sweet holiday greetings and hope it brings you joy; the second paragraph said, "Our company will pay taxes for the gift. As a tax accountant who has been formally registered by examination, I certainly understood the meaning of this second paragraph - the gift is taxable and this company will pay the tax.
Gift giving is taxable? Those who do not know may have questions. Yes, gifts are taxable in Germany, and the amount of tax depends on whether the gift is received for personal, work or business purposes.
First of all, if a gift is given between private individuals, it is not taxable as long as it is not an extraordinarily expensive gift. For example, if my boss gives me a Christmas snack and I give him an apple cake in return, this is an ordinary exchange of favors and is not taxable. However, if a gift between friends and relatives is worth more than 20,000 euros, it is a gift during life and is subject to gift tax, just like a bequest after death. Gifts between immediate family members, like posthumous bequests, are subject to a higher tax exemption depending on the relationship between the giver and the recipient.
As for gifts received because of work, they are divided into gifts from the Company to its employees and gifts from partner companies.
If a company gives gifts to its own employees, such as on their birthdays, weddings, or the birth of a child, the gifts are not taxable as long as they are small tokens of appreciation that do not exceed the scope of daily social interaction. As to what is considered a non-taxable social gift, the law also specifies that the current value is not more than 60 euros. If the value of the gift exceeds 60 euros, then the entire value of the gift must be taxed as part of the employee's salary.
Before the outbreak, it was common for German companies to treat their employees to a pre-Christmas banquet to thank them for their hard work over the year, and all expenses for the banquet were apportioned to the employees who signed up for the banquet. For such parties, if the cost per person exceeds 110 euros, then the excess is also taxable as salary income, while parties costing less than 110 euros per person are limited to a maximum of two per year, with the third party being taxable regardless of the cost. It is often necessary for the court to decide in detail what expenses are to be included in the apportionment of expenses and what expenses are not to be included in the apportionment.
If a company rewards its employees, whether in cash or in kind, it must be taxed. Even if an employee purchases a product from the company at a discounted price, the discounted portion must be taxed as part of the income if it exceeds a certain amount.
Then again, gifts between partner companies to employees of the other company, like the one I received this year, are also part of professional income and subject to personal income tax. For a long time, such gifts were gray income, not explicitly regulated by law, and the people who received them were unsure of themselves. Since 2007, the German Personal Income Tax Act has added a provision that allows the company giving the gift to pay a flat 30% tax on the recipient's income; together with other miscellaneous taxes, the party giving the gift can pay approximately 38% of the tax before the recipient can be officially notified that the tax has been paid, and the recipient does not have to declare the income in his or her tax return. In addition, if the value of the gift exceeds 35 euros, the VAT on the purchase of the gift (usually 19%) and the tax paid on the gift (approximately 38%) cannot be used to reduce the company's income tax liability on the company's expenses. So for every gift worth more than 35 euros, the company giving it ends up paying a combined direct and indirect tax of up to 90%!
Regarding gifts for official purposes, Germany explicitly prohibits bribes, and gifts between cooperating companies cannot exceed the scope of general social gifts, and all forms of gifts to civil servants are strictly prohibited. German civil servants are very sensitive to this, treats, meals, gifts, are forbidden questions, the other party will not only be happy, but counterproductive, will cause embarrassment. Woolf, the tenth president of Germany, was prosecuted by the prosecutor for gifts he received during his tenure as state chancellor, causing him to resign. Although he was eventually acquitted of the charges, his illustrious political career came to an abrupt end.
Because of my work, I often have the opportunity to deal with civil servants of the German tax office. Occasionally, on my birthday, I would bring a cake for my colleagues to enjoy, and if they were present, I would politely ask them if I could have a piece of cake with them. Since it was just a piece of cake that I had baked and it was not specially made for them, they usually accepted and thanked me. But if I give a gift in the name of a person or a company worth more than 15 euros, then they have to surrender the gift they received. Each German state has its own detailed rules about what kind of gifts civil servants can accept. In Bavaria, for example, where beer is a very common and prevalent beverage, the state rules state that civil servants can accept gifts of one case of beer, but not more than that. Usually companies follow the explicit rules and don't create problems for themselves or for each other.
I saw the little card in the Christmas gift, understood what the other party meant, knew I could accept the gift with confidence, would smile, and went back to work.
That evening I came home with Christmas treats and a sports bag. The children were very happy to see the exquisite treats, and my youngest son asked his brother and left the sports bag. I was curious and asked him how much a sports bag like this cost, and he picked up his phone and searched for it and replied that it was about 20 euros, and that the WWF calendars were less than 15 euros each. Then the tax paid directly by the partner company giving the gift is about 15 euros. The two items add up to 55 euros, which has to be deducted from the company's expenses, so there is an additional income tax of about 16 euros, for a total expense of more than 70 euros.
For Christmas, I receive a gift for work that has already been taxed.
