Ex Gratia Payment

An ex gratia payment is a voluntary payment made in the interests of justice, favor, or charity, without legal obligation.

Definition:

• Ex gratia payments are payments made voluntarily, not as payment for a debt or service.
• They are typically made to show gratitude, favor, or charity.
• The payment is not legally enforceable, meaning that the recipient is not obligated to repay it.

Examples:

• A gift to a friend or family member.
• A payment to a charity or non-profit organization.
• A payment to a government agency as a bribe or gratuity.

Legal Considerations:

• Ex gratia payments are not considered taxable income in most countries.
• However, they can be taxable if they are part of a scheme to avoid taxes or other obligations.
• In some jurisdictions, ex gratia payments can be made subject to regulations, such as anti-corruption laws.

Examples of Ex Gratia Payments:

• A landlord making a gift to a tenant for Christmas.
• A company making a donation to a charity in recognition of a customer’s service.
• A teacher making a discretionary payment to a student who has exceeded expectations.

Note:

Ex gratia payments are not the same as bribes or corrupt payments. Bribes are illegal payments made to influence a person’s actions, while ex gratia payments are made voluntarily and without coercion.