5 things you should know about company wine taxation
Company wines are a popular gift for employees and business partners. Many companies also use them as part of a representation, company parties or as a treat for key clients. But what about their taxation? Here's an overview of the main tax considerations associated with company wines.
What is "still wine"?
A still wine is a wine without carbon dioxide, i.e. a wine that is neither sparkling nor effervescent. It is the most common type of wine and includes red, white and rosé wines without bubbles.
1. Company wine as a gift to business partners
If a company purchases wines as gifts for business partners, these costs fall under the category of entertainment expenses. According to Czech tax law, these expenses are not tax deductible, which means that the company cannot deduct them from its taxes.
This is the point where a change has been made as of 1 January 2024. Until then, still wines were considered promotional items and so costs up to the value of CZK 500 excluding VAT could be included as tax deductible entertainment expenses. However, this exemption has been abolished. From this date onwards, the cost of still wine is no longer tax deductible. However, VAT payers can still claim a VAT deduction for gifts of up to CZK 500 excluding VAT, including still wine.
2. Company wine for employees
If a company provides wine to its employees, for example as a Christmas gift, this is considered to be non-cash income to the employee. In this case, the wine is subject to taxation as ordinary income of the employee, i.e. income tax and social security and health insurance contributions. However, if the value of the gift does not exceed CZK 2,000 per year and it is a non-monetary benefit provided from the cultural and social needs fund, it may be exempt from tax.
3. VAT on company wines
VAT is unchanged from 1 January 2024, i.e. VAT deduction is possible for gifts (including silent wine) if the purchase price does not exceed CZK 500 excluding VAT and the wine is provided as part of an economic activity. The company can claim a VAT deduction, but the cost of the wine itself no longer reduces the income tax base.
4. Consumption tax on still wine
An consumption tax on still wine has still not been introduced in the Czech Republic, although it has been discussed. This means that companies do not have to deal with consumption tax when buying still wine, which remains an advantage over other types of alcohol.
5. Recommendations for companies
- Clear evidence: It is recommended that detailed evidence be kept of the purchase and use of company wines so that it can be demonstrated how the wine has been used.
- Watch out for limits: For employee benefits, it is important to keep track of exemption limits to avoid additional levies.
Conclusion: from 1 January 2024, if wine or other alcohol is given as a gift in the course of an economic activity, it is always a non-taxable expense for income tax purposes. The right to deduct VAT under the above conditions remains.
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