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Tax‑free Participation in Company Events
The Federal Fiscal Court (BFG) has ruled that monetary benefits from company events that exceed the tax‑free amount of EUR 365 per employee do not give rise to wage tax liability when they are granted in the predominant own‑business interest of the employer.
A property management company organised an annual company outing and a Christmas party each year from 2012 to 2015. The costs of these events exceeded the exemption amount of EUR 365 per employee in the relevant years. However, the company did not subject the excess amount to wage‑related social security deductions. The tax office, on the other hand, regarded the costs as a monetary benefit and assessed wage tax as well as social security contributions.
Decision of the BFG
Under Austrian tax law, monetary benefits from company events are tax‑free up to EUR 365 per employee per year, and non‑cash benefits received up to EUR 186 per employee per year are also tax‑free. If the costs exceed this amount, the employee has taxable income. However, there is an exception where the benefits from the event are granted in the predominant own‑business interest of the employer.
Company events such as company outings or Christmas parties can be in the predominant own interest of the employer, if they serve the workplace atmosphere and the promotion of employee cohesion. In such cases the benefit does not constitute additional remuneration for the employees, but rather the promotion of the business as a whole. Accordingly, there is no predominant business interest where a company event is merely a occasion to provide additional remuneration to employees.
Consequently the BFG decided that a annual company outing and a Christmas party serve, in any case, to foster contact among employees and to improve the workplace climate. While company events can also be seen as a thank‑you to staff, the employer’s interest outweighs that of the employee. Moreover, out of concern about taxation, fewer employees might attend the company event, which would increase the monetary benefits for the remaining employees.
Conclusion
Company events can, according to the BFG, be in the predominant interest of the employer when they promote the workplace atmosphere and corporate culture. The tax office, however, lodged an administrative revision with the Administrative Court (VwGH) against the BFG’s finding, arguing that no monetary benefit exists for the employee only when the benefit is granted in the exclusive interest of the employer. It therefore remains to be seen how the VwGH will decide the legal question.
Decision of the BFG
Under Austrian tax law, monetary benefits from company events are tax‑free up to EUR 365 per employee per year, and non‑cash benefits received up to EUR 186 per employee per year are also tax‑free. If the costs exceed this amount, the employee has taxable income. However, there is an exception where the benefits from the event are granted in the predominant own‑business interest of the employer.
Company events such as company outings or Christmas parties can be in the predominant own interest of the employer, if they serve the workplace atmosphere and the promotion of employee cohesion. In such cases the benefit does not constitute additional remuneration for the employees, but rather the promotion of the business as a whole. Accordingly, there is no predominant business interest where a company event is merely a occasion to provide additional remuneration to employees.
Consequently the BFG decided that a annual company outing and a Christmas party serve, in any case, to foster contact among employees and to improve the workplace climate. While company events can also be seen as a thank‑you to staff, the employer’s interest outweighs that of the employee. Moreover, out of concern about taxation, fewer employees might attend the company event, which would increase the monetary benefits for the remaining employees.
Conclusion
Company events can, according to the BFG, be in the predominant interest of the employer when they promote the workplace atmosphere and corporate culture. The tax office, however, lodged an administrative revision with the Administrative Court (VwGH) against the BFG’s finding, arguing that no monetary benefit exists for the employee only when the benefit is granted in the exclusive interest of the employer. It therefore remains to be seen how the VwGH will decide the legal question.