Have you already had your Christmas party? Did you celebrate generously and exceed the EUR 110 gross limit? Then please consider not only the wage tax consequences, but also the input VAT deduction. Background: For employees, attending the event is generally exempt from tax and social security contributions. However, this only applies to a maximum of two company events per year. In addition, each event must not cost more than EUR 110 per participant, including VAT and an accompanying person (e.g. spouse). If the EUR 110 amount is exceeded, the entire tax benefit is forfeited. If the EUR 110 limit (including VAT) is not exceeded, the benefit to the employees is exempt from wage tax and the input VAT is deductible for the company. The employees also do not have to pay VAT on the benefit, provided the limit is observed. However, if the EUR 110 is exceeded, recent case law holds that the employer is no longer entitled to deduct input VAT. In return, the employees are also no longer subject to VAT on the deemed withdrawal. The wage tax obligation remains, though a flat-rate taxation may be applied. In this case, the employer can tax the event on behalf of the employees at a flat rate of 25 percent. For example, if the costs per participant amount to EUR 140, the flat-rate tax per employee is EUR 35. If, as an employer, you choose not to apply the flat-rate taxation, there is bad news for the employees, as each will then have to declare the amount in their own tax return, which may lead to dissatisfaction.
Frequently asked questions
Frequently asked questions
Up to what limit are company events exempt from wage tax and social security contributions?
A tax-free allowance of EUR 110 gross applies per employee and per event (including VAT and costs for accompanying persons). This benefit applies to a maximum of two company events per year. If the EUR 110 threshold is exceeded, the tax exemption is forfeited for the excess amount, or, according to current interpretation, for the entire benefit.
Is input VAT deduction from a company event possible if the 110-euro threshold is exceeded?
No. According to recent case law, the employer is not entitled to deduct input VAT on the costs of a company event if the threshold of 110 euros per participant is exceeded. In return, however, no VAT has to be paid on the withdrawal or free benefit provided to the employees.
What are the wage tax consequences of a company event exceeding 110 euros per participant?
If the 110-euro threshold is exceeded, the benefit remains subject to wage tax. The employer may apply a flat-rate taxation of 25 percent. If the employer waives the flat-rate option, each employee must individually pay wage tax on the monetary benefit.
What is the flat-rate wage tax for a company event costing 140 euros per participant?
At 140 euros per participant, the employer may apply a flat-rate tax of 25 percent on the benefit. This results in a flat-rate wage tax of 35 euros per employee. In addition, the solidarity surcharge and, where applicable, church tax also apply.
How are costs for accompanying persons treated under the 110-euro threshold?
The costs for an accompanying person, such as a spouse, are attributed to the employee and counted toward the 110-euro threshold. No separate allowance applies to the accompanying person. This causes the threshold to be exceeded more quickly, jeopardizing both input VAT deduction and wage tax exemption.