Definition and Legal Classification of Company Events
Company events are events organized within a business context, aimed at fostering the work environment, promoting community spirit, and supporting social interaction. Typical examples include Christmas parties, company outings, anniversaries, or summer parties. Legally, company events play a significant role, especially in tax and social security law, as such occasions may provide employees with monetary benefits.
Requirements for the Existence of a Company Event
For a legal qualification as a company event, it is essential that the event is organized by an employer for all members of the company or at least for a clearly defined subgroup (e.g., a department). The event must predominantly serve the employer’s business interests. An event is not considered a company event if it is held exclusively for private or purely social reasons.
Participants
In principle, employees of the company are eligible to participate, including part-time staff, temporary workers, and trainees. Former employees (such as pensioners, retirees at company anniversaries) and relatives of employees (e.g., spouses) may also participate to a limited extent; particular tax rules regarding this must be observed.
Tax Treatment of Company Events
Participation in company events generally leads to a pecuniary benefit. However, this benefit can remain tax-free if certain requirements are met, in particular under Section 19 (1) sentence 1 no. 1a of the German Income Tax Act (EStG).
Tax Allowance and Exemption Limits
For company events, there is a tax allowance of 110 euros per employee (including VAT and proportionally for accompanying persons) per event, and for up to two events per year. If the benefits per event and person exceed this limit, only the amount exceeding the limit is subject to tax and, if applicable, social security contributions.
Calculation of Benefits
The benefits to be taken into account include all costs incurred for organizing the event, such as food, drinks, entertainment, possible accommodation and travel expenses, as well as any gifts (tax-free up to 60 euros gross per person as part of the event). The total costs are allocated to the actual number of attendees present.
Wage Tax Flat Rate
If the value of the benefit exceeds the tax allowance, the excess amount can be taxed at a flat rate of 25% (§ 40 (2) sentence 1 no. 2 EStG). This tax burden is generally borne by the employer. This may result in social security contributions becoming due.
Social Security Law Classification
If the tax allowance is exceeded, or if the event does not qualify as a company event for tax purposes, the benefits are generally subject to social security contributions if they are attributed to individual employment income. Otherwise, the relevant exemption provision applies.
Distinction from Other Types of Events
Not every event organized by the company qualifies as a company event. Company meetings, in-company training sessions, and official meetings primarily serve business purposes and must be treated differently. Events for hosting business partners or for customer retention purposes generally do not fall under the definition of a company event.
Documentation and Proof Obligations
Detailed documentation is required for recognition under tax and social security law. The employer must keep records of costs, participant lists, and evidence of all expenditures. This is particularly important during wage tax audits.
Company Events from an Employment Law Perspective
From an employment law perspective, company events do not constitute a mandatory work event. Generally, there is no entitlement to organize or participate in such events. An obligation to participate may arise if it is contractually stipulated or ordered by instruction. Participation in company events is generally counted as paid working time if the event takes place during normal working hours or is made mandatory.
Accident Insurance Coverage
Participants in a company event are generally covered by statutory accident insurance, provided the event predominantly serves business interests and falls within the organizational responsibility of the employer. Insurance coverage applies to the direct route to and from the event as well as the actual event period.
Company Events and Data Protection
When collecting and processing personal data as part of company events—such as for participant lists, photos, and videos—the provisions of the General Data Protection Regulation (GDPR) must be observed. In particular, this includes obtaining consent for the use of images.
Practical Examples and Special Cases
Family Members as Guests
If employers invite employees’ family members, the resulting costs must be allocated proportionally to the employees. For the application of the tax allowance, these expenses are added to the total amount.
Gifts and Raffle Prizes
Non-cash benefits, such as gifts worth up to 60 euros on the occasion of a company event, are tax-free. On the other hand, raffle winnings are fundamentally taxable and must be treated as a monetary benefit if they exceed the exemption threshold.
Literature, Case Law, and Further Sources
- § 19 Abs. 1 Satz 1 Nr. 1a EStG
- § 40 Abs. 2 Satz 1 Nr. 2 EStG
- Lohnsteuer-Richtlinien (LStR)
- Handbuch der Lohnsteuer, aktuelle Kommentierungen
- Administrative instructions of the Federal Ministry of Finance (BMF letters)
- Case law of the Federal Fiscal Court (BFH), particularly regarding the definition and scope of company events
Summary: Company events represent a significant aspect of in-company interaction and are particularly important under tax, social security, and employment law. Clear differentiation, accurate tax assessment, and proper documentation are essential for employers. Compliance with legal requirements helps to minimize possible tax and social security risks and preserves the social-promoting nature of such events.
Frequently Asked Questions
What tax exemption amounts apply to company events?
The German Income Tax Act provides for a tax exemption amount of 110 euros per participating person and per company event. This exemption applies to a maximum of two events per calendar year. If the expenses (including VAT) exceed the exemption amount, the excess is treated as a taxable benefit and must be individually allocated to each employee’s wage and taxed accordingly. Expenses include all costs directly incurred by the employer in connection with the company event. These include, among others, costs for food, beverages, admission tickets, room rentals, artistic performances, and any gifts to participating employees, provided their value does not exceed 60 euros gross per event. If the above requirements are not met (for example, more than two events per year or the exemption limit is exceeded), wage tax is due on the excess, which can be levied at a flat rate of 25% under § 40 (2) no. 2 EStG. It is also important for tax treatment that the event is open to all members of the business in order to qualify as a tax-favored occasion.
Which persons must be considered in the context of company events?
When calculating tax allowances, only current employees of the company and, where applicable, their accompanying persons are to be considered. Former employees, retirees, external service providers, or freelancers are generally not included, unless they remain in an existing employment relationship. Family members attending as accompanying persons are included, and their costs are attributed to the respective employee. To determine the tax allowance, the total cost of the event is divided by the number of actual participants (employees and their guests) to calculate the per-person expense. Employees on parental leave, maternity leave, or on sick leave are also deemed eligible to participate, provided they have been invited.
What counts as tax-relevant costs of a company event?
All expenses incurred directly as a result of the joint celebration on the day of the event are considered tax-relevant costs for a company event. These include expenses for food, beverages, music, entertainment, room rental, decorations, and any gifts to employees. Travel costs (for example, for a bus transfer to the event location) and accommodation expenses can also be included if they are integral to the event concept. Expenses for accompanying persons’ travel to and from the event, where not covered by the overall event plan, or individual outlays of participants do not count as eligible costs.
How do no-show costs affect the calculation of the exemption amount?
If an employee falls ill at short notice or does not participate in the company event despite registration, this does not automatically reduce the total costs to be considered. According to recent case law, only participants actually present are relevant to the calculation of per-capita costs, not registered but absent guests. The costs to be allocated are therefore divided only by the number of those present, which may lead to the 110-euro exemption limit being exceeded. It is therefore important to realistically estimate the expected number of participants.
Are gifts given on the occasion of company events tax-free?
Gifts given as part of company events are tax-free provided the value per employee and event does not exceed 60 euros (including VAT). If this value is exceeded, the entire gift is taxable, and it is considered a pecuniary benefit. The gifts are deemed an additional benefit on top of the actual catering and event costs, and are included in the total costs for the 110-euro exemption calculation. If the value of the gift is below the exemption threshold, it is tax-advantaged.
What are the special employment law considerations for participation in company events?
There is no obligation for employees to participate in company events. Participation is fundamentally voluntary and outside regular working hours. However, attendance time may under certain circumstances be considered working time, for example, if there is a business purpose or mandatory presence under employment law. Work-related accidents during a company event are generally covered by statutory accident insurance, provided it is a genuine company event and all employees were invited.
What social security provisions apply to company events?
Social security regulations essentially follow tax treatment. If the costs per employee remain within the 110-euro exemption, the benefit is exempt from social security contributions. If the exemption limit is exceeded, the excess is subject to social security contributions. If the employer applies the flat-rate wage tax according to § 40 (2) no. 2 EStG, social security contributions can also be collected on a flat-rate basis under § 1 SvEV. The costs for accompanying persons are attributed to the respective employee and are thus also subject to social security contributions if they exceed the exemption threshold.
