Tax rules for Christmas parties, Christmas gifts and half tax: everything you need to know

Tax rules for Christmas parties, Christmas gifts and half tax are something everyone has to deal with. This guide gives you a comprehensive overview of the tax rules that apply to Christmas events and financial benefits during the Christmas season, so you can avoid tax pitfalls and plan a safe and enjoyable celebration.

Christmas table: Tax rules for small and large businesses

Christmas parties are a popular tradition in Norwegian working life. To make it easy for businesses to arrange social gatherings without worrying about tax liability, there are clear rules. Here you get an insight into how you can arrange a tax-free Christmas party for employees - or what applies if you run a sole proprietorship.

Companies with employees

If the company has employees, the Christmas table can be arranged tax-free, provided that certain requirements are met:

1. Affordability requirements: The costs must be kept within reasonable limits. This means that the expenses for the Christmas table should be in line with what is common in Norwegian working life. A lavish event, especially if it involves expensive accommodation or expensive food and drink options, may result in the tax exemption being forfeited.
   
   
2. Participation: To retain the tax exemption, the event must be available to all employees. Companies can include spouses or cohabitants, as long as this is clearly communicated. Inclusion of partners can contribute to a more pleasant experience, but remember that the main rule is that the employees themselves should be the focus.
   
   
3. Place: Although the Christmas party can be held abroad, the costs should be at a level that corresponds to a typical Norwegian event. Expensive travel increases the risk that the Christmas table is considered taxable.
   
   
4. Number of events: The tax authorities assess the company's overall welfare measures during the year. If the company has several large, expensive gatherings throughout the year, this can affect tax freedom. Therefore, make sure that the Christmas table is one of the few large celebrations.

Sole proprietorships and small businesses without employees

For sole proprietorships and joint-stock companies without employees, the tax rules are different. If you have no employees, you cannot get a tax deduction for the expenses for the Christmas table - it is considered a private expense. This also applies to joint-stock companies where all employees are owners or family members. The tax authorities consider this a welfare measure for private use.

Christmas gifts for employees: What can you give tax-free?

Christmas gifts for employees are a great way to show appreciation, and fortunately, employers can give tax-free gifts of up to NOK 5,000 per employee per year. This applies to both permanent and part-time employees, and includes gifts that cannot be exchanged for cash.

1. Gift types: Tax-free gifts can be gift cards, baskets, experiences or products. The gift card must be linked to certain goods or services for it to be tax-free. Pure cash gifts, on the other hand, are taxable.
   
   
2. Value limit: Gifts that exceed the value limit of NOK 5,000 are taxable in their entirety. For example, if the company gives a gift worth NOK 5,500, the recipient must pay tax on the entire amount, not just the difference of NOK 500.

Gifts for business associates

Although many people would like to give a little attention to customers or business partners at Christmas, it is good to be aware that gifts to business associates do not give you the right to deduct. The tax authorities consider such gifts as representation, and therefore the expenses cannot be deducted from the tax.

Alcohol and representation

Alcohol in connection with representation is a topic that requires extra attention. When it comes to internal Christmas celebrations, the company can serve both wine and spirits without affecting the tax deduction. For representation that includes external guests, however, stricter rules apply.

1. External representation: Serving alcohol to business associates can be problematic. While wine and beer may be eligible for deduction, serving spirits will, as a general rule, result in the deduction being lost. Therefore, carefully consider the type of alcohol served when external parties are present.
   
   
2. Internal Christmas celebration: When only employees are present, there are no restrictions on the type of alcohol that can be served, and the company is free to offer both wine, beer and spirits.

Half tax in December: How does it work?

Half tax is one of the most well-known benefits for employees during the Christmas season. This provides a pleasant financial boost in December and acts as a kind of bonus. But how does half tax actually work in practice?

1. How it works: Half tax means that the employer deducts half as much tax from the salary in December (or sometimes November), so that a higher amount is paid out. This is not a tax-free income, but a reduced deduction that only applies to one salary payment per year.
   
   
2. The month for half tax: It is common for half the tax to be paid on the December salary, but some companies choose to use November instead. This may be a good idea if employees are paid at the end of the month, so that the financial boost comes in time for Christmas shopping.
   
   
3. Half tax in practice: If you are going to pay out half the tax deduction, there are a few points you must keep in mind:
   
   
   • For recipients of certain social security benefits and allowances - including annuity, pension, introduction allowance and supplementary allowance for people with a short stay in Norway - half tax deduction applies for November or December, depending on the employer's choice.
   • For hourly, daily or weekly employees exemption from tax withholding for the earning period in the last two weeks of November or alternatively the last week of November and the first week of December.
   • For employees with 14 days' salary Half the tax deduction can be carried out either on the last salary payment in November or the first in December.

Who is entitled to half tax?

Anyone who receives an ordinary salary from an employer can receive half the tax. This applies to both permanent employees and temporary workers. Companies are, however, free to agree with the employee when and how the tax is to be distributed, as long as the drawing follows the Norwegian Tax Agency's guidelines.

How does half tax affect the rest of the tax year?

Half tax does not mean lower tax overall. Instead, the employer spreads the tax burden over the rest of the year to make room for the reduced deduction in December. The tax deduction is thus adjusted throughout the rest of the year, so that the total the tax payments will be the same.

Summary

The tax rules for Christmas parties, Christmas gifts and half tax may seem complicated, but with this overview you can plan a safe celebration. Make sure the Christmas table is kept within reasonable limits and is open to all employees, give gifts that stay within tax-free limits, and be aware of alcohol and entertainment rules. Use half tax as an additional incentive for employees, but remember that this only affects the tax deduction for one salary.

With these measures, you can create an inclusive and positive Christmas experience for everyone in the company - without tax concerns.