Are you planning a team-building event or a company outing and wondering if the costs of such an event are tax-deductible? The answer is: it depends. The deductibility of such expenses depends on several important factors, which the tax authorities always analyze together.
What should you pay attention to when organizing a team-building event?
- The splendor of the event
The first aspect is the scale and nature of the event. Luxury hotels, concerts, or spectacular shows raise red flags for the tax authorities. Such expenses may be considered entertainment expenses.
Representation expenses are expenses intended to build a grand, ostentatious company image externally. If a team-building event is deemed solely for representation purposes, the expenses will not be tax-deductible. Therefore, it's important to exercise moderation when planning.
- Event participants
Who is attending the event also matters.
Expenditures in the part attributable to:
- full-time employees,
- members of the management board,
- and their families,
may constitute a tax deductible expense.
The situation changes when you invite:
- B2B collaborators,
- contractors.
In such a case, the tax office may consider that we are dealing with representation and exclude these expenses from tax costs.
- Alcohol
The rule here is simple: alcohol is always for ceremonial purposes. This means that this portion of the expenses is not tax-deductible, regardless of who is attending the event or its purpose.
- Training program and substantive elements
A big plus are substantive elements such as:
- training,
- workshops,
- development meetings.
They demonstrate that the event's goal is not only to foster team-building but also, for example, to enhance employee competencies. In practice, it's worth preparing a formal event plan. Such a program helps demonstrate that the event has a business rationale, not just a representative function.
A comprehensive assessment is crucial
The most important thing is that the tax authorities always look at the bigger picture. Even if you only invite full-time employees, the party will be:
- very sumptuous,
- devoid of substantive part,
- with a lot of alcohol,
the office may still consider it entirely as representation and exclude the expenses from tax costs.
If you're unsure what portion of the costs of an event or team-building trip can be included in your tax deductions, contact us – we'll help you analyze your event and confidently file your taxes.
