To improve the working atmosphere, companies occasionally hold so-called company events. The employer incurs costs in this connection, which raises the question of the extent to which input VAT may be deducted on such expenses.
Predominantly in the business interest of the employer
Where the employer obtains supplies for such a company event, input VAT may only be deducted if the supplies obtained predominantly serve the business interest. This is assumed to be the case where the supply qualifies as a "courtesy" (Aufmerksamkeit) within the meaning of § 3 Abs. 9a Nr. 2 UStG and therefore not as a taxable other supply.
Courtesies within the meaning of the German VAT Act
Pursuant to Section 1.8 paragraph 3 UStAE, contributions by the employer—including those made at company events—are to be classified as courtesies if:
- They are customary, and
- They do not result in a significant enrichment of the employee.
This includes benefits in kind up to a value of EUR 60, e.g. flowers, food and beverage items, etc., given to the employee on a special personal occasion (birthday, wedding, etc.). This principle also applies to benefits an employee receives during a company event, although such courtesies must then be included when determining the threshold of EUR 110 per participant. Further courtesies eligible for input VAT deduction include drinks and food and beverage items that an employer provides to its staff free of charge.
Tax authorities continue to apply the EUR 110 threshold
Benefits granted in the course of a company event are regarded by the tax authorities as falling within the customary scope if they do not exceed EUR 110 including VAT per participant. If this threshold is not exceeded, the tax authorities assume that the business purpose overrides the employees' private benefit, and an input VAT deduction on the costs incurred is permitted. However, this only applies if no more than two company events are held per year.
If the benefits exceed the amount of EUR 110, the tax authorities assume that the participants' interest is exclusively private, with the result that no input VAT deduction is available.
Frequently asked questions
Frequently asked questions
When is input VAT deduction permitted for company events?
Input VAT deduction is only possible if the goods or services received are predominantly in the employer's business interest. According to the tax authorities, this is the case when the benefits qualify as minor gifts (Aufmerksamkeiten) within the meaning of § 3 Abs. 9a Nr. 2 UStG and therefore do not constitute a taxable supply to the employee.
What is the significance of the EUR 110 threshold for input VAT deduction?
If benefits per participant including VAT remain at no more than EUR 110, the tax authorities treat them as customary and predominantly business-related, allowing the input VAT deduction. If the threshold is exceeded, an exclusively private benefit for the employees is assumed and the input VAT deduction is denied in full. A further requirement is that no more than two company events are held per year.
What qualifies as a token of appreciation (Aufmerksamkeit) under VAT law?
Tokens of appreciation are non-cash gifts of up to EUR 60 given to an employee on a special personal occasion such as a birthday or wedding, for example flowers or small luxury items. Beverages and small luxury items provided free of charge at the workplace also fall into this category. Such gifts do not constitute a significant enrichment of the employee and entitle the employer to input VAT deduction.
How are small gifts during a company event included in the EUR 110 limit?
If an employee receives a small gift during a company event, for example a token of appreciation worth up to EUR 60, its value must be included when calculating the EUR 110 limit per participant. The total amount granted per participant, including such small gifts, must not exceed EUR 110 gross in order to preserve the input VAT deduction.
What happens to input VAT deduction if more than two company events take place per year?
Input VAT deduction within the EUR 110 threshold is only available for a maximum of two company events per year. For any additional events, the tax authorities no longer assume a predominantly business-related interest, meaning the expenses are deemed privately co-induced and input VAT deduction is excluded.