Gift certificates are one of the most common gifts or incentives used by both individuals and managers for their employees. How to tax them is a separate issue that needs to be clarified.
Income received as an additional benefit
In accordance with the provisions of the Tax Code of Ukraine (hereinafter – the Tax Code), the total monthly taxable income of the taxpayer includes income received as an additional benefit in the form of the value of goods received free of charge (works, services), determined by the rules of normal price, as well as discount on normal price (value) of goods (works, services), individually assigned to such taxpayer, except for the amounts of accrued interest for the use of credit in accordance with the Law of Ukraine “On social and legal protection of servicemen and members of their families”.
Additional benefits are funds, tangible or intangible assets, services, other types of income paid (provided) to the taxpayer by the tax agent, if such income is not a salary and is not related to the performance of employment duties or is not a reward under civil law agreements (contracts) concluded with such a taxpayer (except in cases expressly provided by the provisions of Section IV of the Tax Code).
Features of taxation
If the additional benefits are provided in non-monetary form, the amount of tax of the object of taxation is calculated according to the rules specified in item 164.5 Art. 164 of the Tax Code (item ‘g’ of subitem 164.2.17 item 164.2 of Art. 164 of the Tax Code).
According to item 164.5 of Art. 164 of the Tax Code when accruing (providing) income in any non-monetary form, the tax base is the value of such income, calculated at normal prices, the rules for determining which are set in accordance with the Tax Code, multiplied by a factor calculated by the following formula:
К = 100 ÷ (100 – Сп),
where K is the coefficient;
Сп is the tax rate set for such income at the time of their accrual.
At the same time, the value of gifts (as well as prizes for winners and prize-winners of sports competitions) is not included in the total monthly taxable income of the payer – in the part not exceeding 25% of one minimum salary (per month) set on January 1 of the reporting tax year, except for cash payments in any amount (subitem 165.1.39, item 165.1 of Art. 165 of the Tax Code).
According to item 167.1 of Art. 167 of the Tax Code, the tax rate is 18% of the tax base on income accrued (paid, provided) (except for the cases specified in subitems 167.2-167.5 of Art. 167 of the Tax Code), including but not limited to the form of: salary, other incentive and compensation payments or other payments and rewards that are accrued (paid, provided) to the payer in connection with the employment relationship and under civil law contracts.
Therefore, if a legal entity provides gift certificates to individuals, the value of such certificates is included in the total monthly (annual) taxable income of the taxpayer as an additional benefit and is taxed at a rate of 18% at the source of payment, subject to subitem 165.1.39 item 165.1 Art. 165 of the Tax Code.
