As part of a company party, most companies organise Christmas parties every year at the end of the year. The costs for this are usually borne by the employer. These expenses can be claimed for tax purposes to a certain extent. However, there are a few things to bear in mind to save tax. The Northwind HR team has listed here what you should consider when organising your Christmas party and points out possible solutions.
Then a Christmas party is recognised for tax purposes
First of all, a Christmas party is only tax-deductible if it is a company event to which all employees are invited. This also includes mini-jobbers and temporary staff. Celebrations within the management level or in individual departments do not count as tax-deductible events.
However, the law imposes further conditions so that you can deduct your Christmas party from tax:
- Maximum costs of 110 euros per employed person per year
- The maximum cost is always the gross amount (incl. VAT)
- Amount includes costs for location, gifts, food, drinks, travel expenses and accommodation
- Maximum of two company events per year
If the costs per employee exceed the allowance of 110 euros, the employer must pay tax on the excess amount as normal wages. This means that income tax and social security contributions are payable on this amount.
Tricks for planning the Christmas party
It is not uncommon for the tax-favoured framework of 110 euros per person to be insufficient. Especially when companies organise not just one Christmas party, but several events a year.
In this case, it is advisable to calculate everything in advance. All expenses for the year must be added up and divided by the number of participants. If the total amount is less than 110 euros, it is exempt from tax.
If the amount is higher and several celebrations are planned, you can consider claiming the more expensive event(s) for tax purposes – and taxing the remaining less expensive event(s) as wages. This is often enough to save tax.
Good to know: The timing of the events does not matter! So it doesn’t matter whether you deduct the first or last party from your taxes!
Please note, however: If family members of your employees attend the Christmas party, the maximum limit of 110 euros per employee including companions still applies – the amount is not increased by non-employees!