Short answer: no. China has no tax-free allowance for employee gifts. Whether you hand an employee a cash red envelope, a box of mooncakes, or a branded hoodie, it is by default taxed as ordinary wage income the moment it is distributed, folded straight into that month's payroll withholding. There is no Spring Festival exception, no small-gift carve-out, and no annual allowance to plan around.
Client and business-partner gifts work completely differently, and that difference is worth understanding before you budget your next campaign, because it changes what a gift actually costs you. Here is exactly how gifts are taxed in China, for employees, for clients, and on the VAT side, so you can plan gifting programs that hold up.
Why every gift to an employee is taxed as wages
Under Chinese individual income tax rules, both cash and in-kind (物品) gifts from an employer to an employee are, by default, treated as "wages and salaries" (工资、薪金所得) income. They get combined with that month's salary and the employer withholds tax on the total via the standard payroll withholding schedule. This applies whether the gift is a red envelope of cash, a shopping voucher, or a physical product like a jacket or a power bank.
There is one narrow exception, and it is easy to miss: benefits that are collectively enjoyed, indivisible, non-cash, and not individually quantified to named individuals. Think a shared office event, a communal snack table, or a team outing where nobody can point to "your ¥300 share." The moment a gift is distributed by name to individual employees, even if it is physical goods rather than cash, it becomes taxable at fair value. A box of mooncakes handed to each employee by name is taxable. A shared spread at an office party generally is not.
No festival exception: Spring Festival gifts are taxed like any other
There is no special exemption for Spring Festival (Chinese New Year), Mid-Autumn Festival, or any other occasion. The traditional "过节费" (festival allowance) paid in cash, and in-kind gifts like mooncakes or holiday gift boxes, are taxed exactly like any other in-kind employee benefit: folded into that month's wages and withheld at source. There is no separate, more lenient bucket for holiday goodwill. If you are budgeting a Mid-Autumn gift program assuming it slides under some threshold, it doesn't, because no such threshold exists.
12 branded gift ideas that still work, even taxed as wages
Since the gift is taxed as wages regardless of what you choose, the real decision is about perceived value and usefulness per RMB spent, not chasing a tax break that isn't there. These are twelve options that read as genuinely useful rather than token, at a range of price points.
1. Hoodie – The Rex
A heavyweight hoodie is one of the few gifts employees actually wear outside the office, which makes it a strong pick when you want the gift to double as quiet brand visibility.
- Material: heavyweight cotton-blend fleece
- Branding: embroidered or printed logo on chest/sleeve
- Order: MOQ 100 · from ¥321/unit.
2. Sports Socks
A low-cost, high-frequency-use add-on, good as a stocking-stuffer alongside a bigger gift rather than a standalone present.
- Material: performance cotton blend
- Branding: woven logo detail
- Order: MOQ 100 · from ¥32/unit.
3. Recycled Steel Bottle
A daily-use item with an obvious sustainability story, useful if your company talks about environmental responsibility anywhere in its employer branding.
- Material: recycled stainless steel
- Branding: laser engraving
- Order: MOQ 50 · from ¥88/unit.
4. A5 Notebook
A safe, low-cost gift for large headcounts, and cheap enough that the wage-tax hit on it is negligible for most employees.
- Material: PU-covered hardback, recycled paper
- Branding: debossed or foil logo
- Order: MOQ 100 · from ¥37/unit.
5. Premium Tote Bag
Practical enough to get daily reuse, which is the main thing that separates a gift people keep from one that ends up in a drawer.
- Material: heavyweight canvas
- Branding: printed or embroidered logo
- Order: MOQ 100 · from ¥52/unit.
6. Knitted Scarf
Seasonal and genuinely warming, a good pick for a winter Spring Festival gift given the timing lines up with colder weather across most of China.
- Material: knitted acrylic/wool blend
- Branding: woven label
- Order: MOQ 100 · from ¥61/unit.
7. Baseball Cap
An easy, low-cost apparel gift that pairs well with a bigger-ticket item in a bundled gift set.
- Material: cotton twill
- Branding: embroidered logo
- Order: MOQ 100 · from ¥67/unit.
8. Espresso Mug
Desk items like this get seen by everyone who walks past, which makes them a quiet but consistent brand touchpoint.
- Material: ceramic
- Branding: printed logo
- Order: MOQ 108 · from ¥68/unit.
9. Bamboo Tea Bottle
Tea culture runs deep in China, so a dedicated tea bottle tends to land better than a generic water bottle for local teams.
- Material: bamboo exterior, stainless steel infuser
- Branding: laser engraving
- Order: MOQ 50 · from ¥150/unit.
10. RollTop Backpack
A commuter-grade backpack is a gift with real perceived value, and the kind of item that gets used long after the holiday season it was given in.
- Material: water-resistant recycled polyester
- Branding: embroidered logo patch
- Order: MOQ 25 · from ¥197/unit.
11. Noise-Cancelling Headphones
A tech gift at this price point signals genuine investment in the employee, useful for recognizing tenure or a strong year rather than a routine holiday token.
- Material: ABS/aluminum housing, memory-foam ear cushions
- Branding: printed or debossed logo
- Order: MOQ 50 · from ¥196/unit.
12. Wireless Powerbank
Practical for anyone who travels or commutes, and useful enough that it gets carried around long after the gifting occasion is forgotten.
- Material: aluminum housing
- Branding: printed logo
- Order: MOQ 50 · from ¥147/unit.
Client gifts: two very different deduction categories
Client and business-partner gifts are not taxed to the recipient the same way employee gifts are (more on that below), but on the giving company's side, Chinese corporate tax law splits deductibility into two categories with very different treatment. Which one applies is a purpose test, and it changes the economics of a gifting program significantly.
Business entertainment expenses (业务招待费) covers gifts given for maintaining client relationships or supporting business negotiations, the classic relationship gift. These are deductible at only 60% of the amount incurred, and capped at 0.5% of that year's revenue. Whatever exceeds the cap is simply lost. There is no carryforward: unused deduction room does not roll into next year.
Advertising and business promotion expenses (广告费和业务宣传费) covers spending aimed at promoting products or building brand awareness, for example branded logo merchandise distributed as part of a marketing campaign. This bucket is deductible up to 15% of that year's revenue (30% for cosmetics, pharmaceutical, and beverage companies), and unlike entertainment expenses, unused amounts carry forward to future years.
The gap between these two is the real hook: branded promotional merchandise has a genuine, well-documented path into the far more favorable "advertising and promotion" category, rather than the capped, no-carryforward entertainment bucket, provided you can show it served a marketing or promotional purpose. That means campaign records, distribution lists, and visible branding, not a one-to-one relationship gift handed to a single contact with no documentation trail. The same branded water bottle can land in either bucket depending entirely on how the distribution is set up and recorded.
VAT on gifts
Giving away goods for free, whether self-produced or purchased, is treated under Chinese VAT rules as a "deemed sale." The giving company must self-assess and pay output VAT on the deemed value, based on the market price of similar goods, even though no payment was actually received. This applies to gifts given to clients and other external parties.
There is a technical nuance worth knowing on the employee side: for goods purchased and then given to employees specifically as welfare, the rule is different. Instead of charging new output VAT, the company reverses the input VAT credit it already claimed on that purchase. The net cash effect is similar, but the mechanic, and the paperwork, is not the same as the deemed-sale treatment for client gifts.
Separately, gifts given by a company to individuals outside the company, for example a client's staff member receiving a gift in a personal capacity rather than as part of company procurement, are taxed to that individual as "incidental income" (偶然所得) at a flat 20% rate, with no exemption threshold at all.
Common mistakes
- Assuming a modest holiday gift is exempt. It isn't. A ¥100 mooncake box is taxed exactly the same way, proportionally, as a ¥5,000 bonus: as ordinary wages, folded into that month's withholding.
- Giving an unbranded client gift and assuming it qualifies as "advertising expense." Only branded, clearly promotional items with documented marketing purpose (campaign records, distribution lists, visible branding) qualify for the favorable 15%-of-revenue, carryforward-eligible category. An unbranded gift to a single client contact defaults to the capped, no-carryforward "entertainment" bucket.
- Forgetting VAT applies even though no payment changed hands. Free goods to clients trigger deemed-sale output VAT on market value; free goods to employees trigger an input VAT reversal instead. Both are real cash and compliance obligations, not administrative footnotes.
If you're setting up an ongoing employee gifting program rather than a one-off order, Sunday's employee gifting platform handles sourcing, branding, and delivery in one place.
This article is for general informational purposes and does not constitute tax or legal advice. Tax treatment depends on your company's specific structure, revenue, and circumstances. Consult a qualified Chinese tax advisor before setting a gifting policy.
For a country-by-country comparison of employee and client gift tax rules, see our complete guide to employee gift tax rules by country.
Looking to set up a compliant, well-documented branded merchandise program for your China team or clients? Talk to Sunday about sourcing, branding, and distribution that holds up on the promotional-expense side. Sunday also supports enterprise-scale rollouts across multiple countries — see the full Sunday platform for details.
