How can you deduct the Christmas party from your taxes?

A company’s Christmas party is a good way to end the year. What bosses have to pay attention to so that they can deduct the Christmas party from their taxes.

A Christmas party in the company is a good opportunity to thank the employees for a good year and to end the year in a cozy and relaxed atmosphere. Exactly how the Christmas party takes place varies depending on the company – some dig deeper into their pockets than others. How the Christmas party can be deducted from taxes.

Tax allowance of 110 euros per head

Depending on the number of employees, a Christmas party can be quite expensive. Companies often want to offer their employees something special as a thank you and therefore spend a little more money on location, food, etc. There is an allowance for Christmas parties that can be deducted from your taxes.

The tax-free allowance is 110 euros gross per employee. The employer then has to tax everything above that. The regulation was relaxed a few years ago: At that time, 110 euros per person was considered the exemption limit and as soon as the value was above that, the entire amount had to be taxed.

All costs must be passed down to the employees

The per capita amount does not just include any food and drinks. The hall rent, DJ costs, personnel costs or costs for your own employees who prepare the celebration are also included – i.e. everything that was spent on the celebration in total.

The total amount is then divided by the number of participants to determine the budget per person. By the way, companies have to be careful here: only people who actually took part in the Christmas party may be taken into account. When planning, you should initially consider that spontaneous cancellations can occur and the price per person could increase accordingly.

All employees must be invited

In order to be able to use the tax allowance of 110 euros for the Christmas party, a number of requirements must also be met. On the one hand, the celebration in the company may not be private and some employees may be excluded. All employees of an organizational unit, location or department must be invited in order to be able to deduct the celebration from their taxes.

In addition, the tax allowance for the Christmas party only applies if the annual closing is only the second celebration of the year. In total, the allowance applies to two company celebrations each year. Companies should then consider which celebrations were the most expensive and cheapest overall and include the allowance for the highest costs.

Be careful with expensive gifts and mini-jobbers

A flat-rate wage tax of 25 percent is then due on the taxable amount – so the tax rate does not have to be calculated individually for each employee. However, if the boss decides to give particularly expensive gifts at the Christmas party, then this wage tax flat rate no longer applies – particularly expensive gifts lead to taxable wages for employees, and depending on this, the employer also has to pay social security contributions for the employee.

Companies should also consider the issue of social security contributions if they employ mini-jobbers who work on a 450 euro basis. Even then, caution is required: If the mini-jobber’s per capita budget exceeds the allowance of 110 euros, then he is viewed as a normal employee subject to social security contributions. At least in the month of the celebration, social security contributions will be due for him.

In order to be able to deduct the Christmas party from your taxes, there are a few things you need to consider. To keep your employees happy, you don’t have to have the most expensive meal or the best restaurant in town. But the company should ensure that employees get a nice end-of-year celebration.

Editorial team

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