Corporate Travel
Incentive trips
company event or incentive trip
Company event or incentive trip: Which is more tax-efficient for you?
Are you deciding between planning a company event or an incentive trip? The tax differences are significant. To make the right choice and avoid costly mistakes, it is important to know the details. Learn more in our personal consultation.
The topic, briefly and concisely
Company events and incentive trips significantly differ in their tax treatment. Choosing the right type of event can bring substantial financial benefits.
Careful planning and documentation of all costs and services is essential to optimally leverage tax advantages and avoid undesirable back payments. With proper planning, you can increase employee motivation by up to 20%.
The jurisprudence of the BFH plays an important role. Stay informed and adjust the design of your events accordingly to stay on the safe side tax-wise and minimise risks.
Learn how to optimise company events and incentive travel for tax purposes. Avoid pitfalls and maximise the benefits for your company and employees.
Planning events for employees and business partners is an important aspect of company culture. The question often arises: Is a company event or incentive trip the better choice? Both types of events offer the opportunity to enhance employee motivation and engagement or to foster relationships with business partners. However, there are significant tax differences that must be considered when making a decision. At GoTuro, we assist you in optimising the tax aspects and avoiding pitfalls.
In this guide, we highlight the key differences between company events and incentive trips, explain the respective tax regulations, and provide practical tips on how to maximise the benefits for your company and employees. This ensures your next event not only becomes a resounding success but is also optimally structured for tax purposes.
The correct tax treatment of company events and incentive trips is crucial to avoid unexpected back payments and to fully leverage financial advantages. Clear distinction and careful planning are therefore essential. Let us explore the details together and find the best solution for your company.
Make the most of the 110-euro tax allowance: How to benefit at company events
Company events are social gatherings designed to promote interaction among employees. These include, for example, one-day company outings, Christmas parties or anniversary celebrations. A key advantage of company events is the €110 tax allowance according to § 19 para. 1 no. 1a sentence 3 of the Income Tax Act (EStG). This allowance applies per employee and event and covers costs such as food, beverages, music or venue hire. It is crucial that the event is open to all employees or a specific part of the company.
In addition to the allowance, there is the option of 25% flat-rate wage tax according to § 40 para. 2 sentence 1 no. 2 EStG. This flat rate significantly simplifies payroll calculations, as the employer assumes responsibility for the tax. To be recognised as a company event, the event must have a social character and promote personal interaction among employees. Judgments of the Federal Finance Court (BFH) confirm these requirements. Further information on the tax aspects of company events can be found here.
It is important to note that the allowance and flat-rate wage tax can only be claimed if the event meets the stipulated requirements. Otherwise, there may be a subsequent tax charge. We at GoTuro are happy to support you in planning and executing your company event to ensure that all tax aspects are considered. This way, you can offer your employees an unforgettable event while benefiting from the tax advantages.
Designing incentive trips with tax optimisation: Is a 30% flat tax the solution?
Incentive trips are reward trips for employees or business partners, often involving an overnight stay. Essentially, incentive trips should be treated as a taxable benefit in kind, unless the business benefit is clearly the priority. One way to reduce the tax burden for the employee is the application of the 30% flat-rate tax as per § 37b EStG. This flat-rate approach relieves the employee from tax and social security contributions, but it is limited to €10,000 per recipient and financial year.
An important aspect is the distinction between an incentive trip and an incentive measure. An incentive trip includes at least one overnight stay, which makes the business catering part of the flat-rate tax base. In the case of an incentive measure without an overnight stay, business catering can be excluded. To avoid tax liability, an attempt can be made to emphasize the business benefit of the trip. This can be achieved through a high supervisory ratio (e.g., 1:30), a ban on private leisure activities, and detailed reporting obligations.
The principle of allocation (BFH VI R 32/03) enables a clear separation of operational functional costs (e.g., speakers) from benefits in kind (e.g., excursions). The remaining costs (e.g., flights, hotels) are then estimated based on the time allocation. It is advisable to plan the design of incentive trips carefully and to consider all tax aspects in order to avoid unpleasant surprises. We at GoTuro are happy to advise you on how to optimize your incentive trips for tax purposes. For more information on the taxation of incentive trips, please click here.
Avoid VAT pitfalls: Here's how to implement incentives correctly
VAT also plays an important role in the design of corporate events and incentive trips. It is important to differentiate between broker services and dealers. With brokerage services, the trip is an additional fee, not considered self-consumption. For dealers, the trip reduces the fee paid to the company. For employees, the incentive trip is considered a non-cash benefit in accordance with § 3 para. 9a No. 2 of the German VAT Act.
The input tax deduction is a complex subject with restrictions according to § 4 para. 5 of the German Income Tax Act. It is therefore advisable to thoroughly inform yourself in advance about the VAT implications. Correct VAT treatment is crucial to avoid financial disadvantages. At GoTuro, we are happy to assist you in clarifying all VAT-related questions concerning your events.
Careful planning and documentation of all costs and services is essential to correctly claim the input tax deduction. We help you take all relevant aspects into account and optimally utilise the VAT benefits. This way, you can ensure that your events are not only a great success but also handled correctly from a tax perspective.
Inviting Business Partners: Tax Implications of Multi-day Events
The participation of business partners in company events and incentive trips raises additional tax questions. A crucial criterion is the overnight stay. While one-day events may be tax-exempt under certain circumstances, participation in multi-day events is generally treated as a monetary benefit for the business partner. The assessment is conducted either as business income (for self-employed individuals) or as salary (for employees).
It is possible to apply a 30% flat-rate tax, allowing the organiser to cover the tax, thus relieving the recipient. However, it should be noted that the costs of business partners participating in multi-day events are generally not deductible as business expenses, because the 50-euro gift limit is exceeded. This results in full non-deductibility.
It is therefore advisable to carefully plan the participation of business partners in events and examine the tax consequences in advance. We at GoTuro are happy to support you in the organisation of your events to ensure that all tax aspects are taken into account and that you avoid financial disadvantages. This way, you can maintain your relationships with business partners while minimising the tax risks.
Correctly interpreting BFH judgments: How to stay on the safe side with your taxes
The jurisprudence of the Federal Fiscal Court (BFH) plays an important role in the tax treatment of corporate events and incentive trips. For example, the BFH ruling VI R 78/12 states that a business benefit can lead to tax exemption. The so-called Portugal decision (BFH VI R 32/03) establishes the principle of apportionment for events with mixed use.
A recent BFH ruling from 2024 states that flat-rate taxation is also possible for executives, provided there is a work-related and social character. To limit risks, clear communication and disclosure of risks are essential, as general disclaimers are generally ineffective. It is therefore advisable to stay updated on current case law and adapt the organization of events accordingly.
We at GoTuro monitor the latest case law and are happy to support you in implementing the relevant rulings in practice. This ensures that your events always meet the current tax requirements and help you minimize financial risks. Stay on the safe side with us in terms of tax and benefit from our expertise.
Enhancing Employee Satisfaction: Creating Clear Incentives and Transparent Communication
Successfully organising company events and incentive trips requires clear criteria and expectations to avoid dissatisfaction. Transparent communication of goals and conditions is essential. It's important to consider the individual needs of employees and create individualised incentives to achieve greater effectiveness.
Careful documentation and proof of all costs and activities are crucial to secure tax benefits. Arbitrary distribution of incentives can lead to discontent, so clearly defined criteria and expectations are important. Individualised incentives are often more effective as they better cater to employees' needs.
We at GoTuro support you in developing clear criteria and expectations for your events. This way, you can ensure that your employees are motivated and satisfied and that the events make a positive contribution to the company culture. Benefit from our experience and turn your events into an unforgettable experience for your employees.
Aligning Business Benefits and Employee Incentives: Achieving the Perfect Balance
Finding the right balance between business benefits and employee incentives is crucial for the success of corporate events and incentive trips. Careful planning that considers all relevant aspects is essential to optimize the tax advantages. Employee motivation plays a central role in employee retention and performance enhancement. Incentive trips and corporate events are valuable tools in personnel management.
A look into the future shows that sustainability and personalisation will become increasingly important in incentives. It is therefore advisable to consider these trends when designing events. The importance of careful planning cannot be emphasized enough. Only then can all relevant aspects be considered and the tax advantages optimally utilised.
We at GoTuro support you in planning and executing your events to find the perfect balance between business benefits and employee incentives. This way you can ensure that your events make a positive contribution to company culture while optimising the tax benefits. Contact us today to optimally design your next corporate event or incentive trip. Also, visit our page on incentive trips for employees for more information.
Secure tax advantages: Plan your company event or incentive trip with GoTuro now!
More useful links
BMF - Federal Ministry of Finance provides official information on tax laws and regulations in Germany.
Federal Statistical Office supplies statistical data on companies and events in Germany.
German Tax Advisors Association e.V. offers information and advice on tax law.
FAQ
What is the main difference between a company event and an incentive trip from a tax perspective?
The main difference lies in the tax treatment. Company events benefit from a €110 exemption and a 25% flat-rate wage tax, whereas incentive trips are generally taxed at a flat rate of 30%, unless the business benefit prevails.
When is a trip considered an incentive trip and when a company event?
An incentive trip typically includes an overnight stay and serves as a reward. A company event is a social occasion open to all or some employees, designed to foster interaction among them.
How can the business benefit of an incentive trip be claimed for tax purposes?
To emphasise the business benefit, the trip should be strongly business-oriented, for example, through a high care ratio (1:30), prohibition of private leisure activities, and detailed reporting obligations.
Which costs can fall under the €110 exemption for a company event?
Costs such as food, drinks, music or room hire fall under the €110 exemption. It is important that the event is open to all employees or a certain part of the company.
What happens if business partners participate in a multi-day company event?
The participation of business partners in multi-day events is generally treated as a non-monetary benefit. The costs are often non-deductible as a business expense, as the €50 gift limit is exceeded.
How does VAT affect company events and incentive trips?
For employees, the incentive trip is considered a benefit in kind pursuant to § 3 Abs. 9a Nr. 2 UStG. The input tax deduction is a complex issue with restrictions under § 4 Abs. 5 EStG.
What role do BFH rulings play in the tax treatment of company events and incentive trips?
BFH rulings, such as VI R 78/12 and VI R 32/03, establish the principles for tax treatment, particularly regarding business benefit and the principle of allocation in mixed-use events.
How can GoTuro assist with the planning of company events and incentive trips?
GoTuro supports you in the conceptualisation, organisation, and execution of your events, taking into account all relevant tax aspects to secure financial benefits and avoid pitfalls.
