The Lower Saxony Tax Court ruled on April 23, 2024 (case reference 8 K 66/22): If the employer organizes a reception on the occasion of the farewell of an employee, it must be decided – contrary to the opinion of the tax authorities – whether it is a celebration of the employer (company event) or a private celebration of the employee, even if the exemption limit of € 110 is exceeded, taking into account the circumstances of the individual case. If it is an employer’s party, however, the tax authorities believe that a taxable non-cash benefit is triggered in relation to the private guests if the costs per participant exceed € 110.

In the case in dispute, a credit institution organized a celebration on the occasion of the retirement of its CEO and the introduction of his successor in the offices of the company headquarters, the costs of which exceeded the exemption limit of € 110 in relation to participants. According to a list compiled by the bank, around 300 people were invited, namely current and former members of the management board, selected employees, the board of directors, members of the public, representatives of important companies and institutions from the region, representatives of banks and savings banks, chambers, cultural institutions and representatives of the press. The Lower Saxony Tax Court came to the conclusion that in this case, based on the type and nature of the event, it can be assumed that the event was predominantly held in the company’s own interests and that the expenses did not result in wages.

As a general rule, the provision of remuneration can only be assumed if the employee is objectively enriched for making their individual labor available. However, an objective enrichment of the employee is not given if the entertainment of the guests takes place on the occasion of a celebration of the employer. Whether a reception hosted by an employer, for example on the occasion of a special event for one of its employees, appears to be a celebration of the employer or of the employee must be decided taking into account all the circumstances of the individual case.

A characteristic of an employer’s party (and therefore no remuneration) may be if the employer acts as host, determines the guest list and primarily invites business partners of the employer, members of public life and the press, association officials and employees of the employer and not private friends and acquaintances of the employee. It must also be considered whether the party has the character of a private celebration or whether this is not the case.

In principle, this is also followed by the tax authorities. However, the tax authorities stipulate that an employer’s party also constitutes wages with regard to the employer’s pro rata expenses incurred by the employee himself, his family members and private guests of the employee if these expenses amount to more than € 110 per participating person. The tax court rejects this flat-rate delimitation.

Important to know:

An appeal against this ruling is now pending before the Federal Fiscal Court under file number VI R 18/24, so that it must be considered in each individual case how such expenses are to be assessed for income tax purposes.

Are you unsure how to declare your company party for tax purposes? Then get certainty and book your first aid consultation now !