Tax trap company party: New rules for exclusive events

Frankfurt. The problem is not the price of the beer. Not even the reservation in the marquee. The biggest tax trap on a company outing to Oktoberfest can be the guest list. Whether a celebration receives tax relief depends on who is invited. As of this year, significantly stricter rules apply to exclusive events with executives.

If the boss gives one to his employees, this quickly creates wages that are subject to wage tax, the so-called “monetary benefit”. This means that income tax is due on the invitation, just like on a salary.

But the tax authorities also know that company celebrations strengthen cohesion and therefore promote these gatherings with a tax advantage. Employees can be invited twice a year if the focus is on improving the working atmosphere.

Expenses of 110 euros gross per person are then exempt from income tax for each event for the employees. Stefan Heine, specialist lawyer for tax law and managing director of the tax software company Smartsteuer, says: “The money can be spent on entertainment, location rental or even ride chips for the Ferris wheel.”

But companies should not plan too tightly. According to the case law of the Federal Finance Court, the total costs of a company party are not to be divided among the invited participants, but among the participants who are actually present. “If a person cancels at short notice, the per capita amount for those present increases,” explains Heine.

Travel costs can also be included in the 110 euros. If the party takes place outside of the workplace, a distinction is made: If the company organizes the journey or there is a hotel contingent, the costs incurred are included in the 110 euros. The employer may only cover individually organized travel and overnight stays separately, tax-free.

And what if the amount is exceeded? The employee then has to pay income tax on his or her own party. “It is usual for the employer to pay a flat rate of 25 percent income tax,” says Heine. This means that the employee does not find out about the costs incurred.

However, the 110 euro rule may only be used if the event is open to all employees. The tax advantage no longer applies to exclusive rounds in which the executives stay among themselves. This was stipulated in the Annual Tax Act 2026, although the Federal Finance Court recently decided otherwise (ref. VI R 5/22). In the opinion of the legislator, a tax advantage that is also granted for closed executive meetings violates the general principle of equality.

“In the case of purely executive meetings, the entire monetary benefit is generally taxable,” says Heine. It is also common here for managers not to pay the wage tax on their party themselves, but for the employer to tax the costs at a flat rate. Instead of 25 percent, he has to pay a flat rate of 30 percent for closed celebrations.

According to the Federal Ministry of Finance, a rate of 25 percent is only suitable as an average tax rate if employees of all wage groups take part in the event. In order to take the requirement of financial performance into account, the higher rate should therefore be applied to managers.

If customers are also at the event, it depends on the exact nature of the meeting. If employees work at this event (for example in customer service, stand service or organization), there is an overriding operational interest. As a result, there is no wages subject to wage tax.