Christmas presents Cash is king

Tax implications, family customs, etiquette – what to consider when giving a gift of money.

by Lukas Hadorn 07 Dec 2016

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In China, nothing happens without “hong bao.” Whether it’s the Chinese New Year, a wedding, a birthday or a service anniversary, red envelopes with golden decorations are handed over on almost every occasion. They are given to the happy newlywed couple, the hard-working granddaughter and the long-serving employee alike. Open them up and you won’t find a card with the person’s best wishes on your special day. What you will find is money – preferably large notes, fresh from the bank.

Giving money as a gift isn’t just good form in China, it’s a social code. The gift is supposed to bring the recipient happiness and prosperity. This is why the envelope is red, as the color red symbolizes good luck. In fact, the exact amount of money is often chosen because the figure or its pronunciation also promises good fortune. For example, 888 yuan will go down better than 900 yuan, thanks to numerology and superstition.

An educational gift for your godchild

Gifts of money are far less common in our part of the world. When money is given, it is usually within the family from the older to the young members or from a godparent. This is absolutely fine, says Marianne Heller, who is responsible for the debt prevention and consumption program at Pro Juventute. “Most children and adolescents are pleased to receive cash. It gives them an opportunity to decide for themselves how they would like to spend it,” she points out.

Such gifts are also educational, as they teach the young recipients to adapt their wishes to the available resources. However, it is important not to break any existing family rules with gifts of money, says Heller. “With younger children in particular, godparents or grandparents should speak to the parents first before giving money.”

In the case of wedding presents, giving cash is only acceptable here – if at all – as a contribution towards a specific investment, such as a honeymoon or a new silver cutlery set. Gifts of money to employees are more common, but are generally paid as discreet bank transfers together with the person’s salary. The strongest argument against giving money is the fear of coming across as bereft of ideas and uncreative. This is also the reason why it is more common to give vouchers. Vouchers can be a mistake, however, as studies show that around a quarter of them are never redeemed.

Money as an incentive to quit smoking

There are also tax issues to consider when it comes to gifts of money. Specifically, gift or inheritance tax may be due on them. Since the cantons are free to set these taxes themselves, the spectrum ranges from total exemptions, such as in the canton of Schwyz, to municipality-specific provisions in relation to exemption thresholds and tax rates for giver and recipient. As a rule, however, the amount of tax is directly dependent on the amount of the gift and the degree of kinship between the two parties.

Surprisingly, one group of people who particularly benefit from gifts of money are addicts. In a study of 800 smokers on low incomes, researchers at the University of Geneva discovered that financial incentives are especially effective when it comes to quitting smoking. When promised a cash reward, more than half of study participants stayed smoke-free during the first three months.

Switzerland’s most popular Christmas presents

The consulting firm Ernst & Young asked 500 people living in Switzerland what type of Christmas presents they tend to give. On average, each person spent 275 francs on presents.

53%

Money and vouchers

53%

Books and e-books

45%

Food and confectionery

39%

Clothing

35%

Toys

26%

Cosmetics

25%

Tickets and events

24%

CDs and DVDs

22%

Jewelry

19%

Consumer electronics