© Photocase / Gerti G.
The Christmas season is just around the corner. Raising a glass to a successful year with colleagues between Christmas trees, festive music and Spekulatius cookies – Christmas parties are popular and strengthen team cohesion. But what should you consider to ensure that your company Christmas party is tax-deductible? To make sure that a successful celebration does not result in unplanned tax and social security consequences, you should keep a particularly close eye on the costs.
When does a company event apply and what should be considered?
Company events are events at the operational level that have a social character. With such events, the employer aims to strengthen contact among employees and improve the working atmosphere. However, the company event must be accessible to all employees of the business.
Up to what limit is the company event tax-free?
Since 1 January 2015, a tax-free allowance applies to benefits granted to employees in connection with company events. It amounts to EUR 110 (gross**)** per participating employee for a maximum of two company events per year. If employees are permitted to bring an accompanying person to the event, the costs for that accompanying person are attributed to them. If the threshold of EUR 110 incl. VAT per person is exceeded, two points must be observed:
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The amount in excess counts as employment income. However, flat-rate taxation at 25 % is available for this portion.
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If the threshold is exceeded, input VAT deduction is not possible. If one person's share of the costs exceeds EUR 110, no input VAT deduction is available for that share of the costs.
Which costs count towards a company event?
The tax-free allowance covers all costs incurred per person at the event. This includes food and drinks, entertainment, transport costs, room rental, music, admission tickets, gifts, and also the planning. The total costs are divided by the number of all persons in attendance. As already mentioned, the share of costs attributable to family members is added to the employee.
Conclusion
To make use of the tax advantages, you should keep a very close eye on the costs per participant. Then nothing stands in the way of a successful Christmas party.
Frequently asked questions
Frequently asked questions
What qualifies as a company event for tax purposes?
Company events (Betriebsveranstaltungen) are events held at the company level with a social character that serve to foster the working atmosphere and contact between employees. To qualify for preferential tax treatment, the event must be open to all employees of the business.
What is the tax-free allowance for company events such as Christmas parties?
Since 01/01/2015, a tax-free allowance of 110 euros gross per participating employee applies. This allowance can be claimed for a maximum of two company events per year. Costs for accompanying persons are attributed to the respective employee.
What are the consequences of exceeding the EUR 110 limit per person?
The amount exceeding EUR 110 qualifies as wages but may be taxed at a flat rate of 25%. In addition, the input VAT deduction is forfeited for the respective cost share per person once the threshold is exceeded.
Which costs are included in the EUR 110 threshold for a company event?
All expenses related to the event count toward the allowance, including food and beverages, entertainment, transportation, venue rental, music, entrance tickets, gifts, and planning costs. The total costs are divided by the number of all persons actually present.
How are the costs for accompanying persons at company events treated?
If an employee brings along an accompanying person, the proportionate costs for that person are attributed to the employee. This may cause the EUR 110 tax-free allowance to be exceeded more quickly, with the excess portion being taxable as employment income.