Every year you look forward to the turn of the year. Besides a fresh start, it offers you the chance to throw cozy staff parties. But how do you best plan such a party? And how do you make sure the costs are tax deductible? No worries, in this blog post we explain to you step by step what to look out for!
Conditions for tax deductibility of a staff party
In order for the costs of your staff party to be tax deductible, you must meet an amount of conditions. The most important is that it really is a “collective social benefit. But what exactly does that entail?
1️⃣ Everyone must be invited!
A staff party is only tax deductible if all employees from your company are invited. 🫂 For example, if you organize a party for one specific department, this falls outside the definition of a collective social benefit. In that case, the costs are not deductible.
So set yourself wide enough and invite everyone, only then can you enjoy the tax benefits 😉.
2️⃣ One party per year is sufficient
A second important condition is that you can deduct only one staff party per calendar year for tax purposes. If you organize several parties, the tax authorities will only charge you for the first one. 📅
So choose your time carefully!
Most companies choose to host a staff party around Christmas, New Year’s or St. Nicholas.
But in principle, it is allowed at any other time of the year as long as there is a valid reason for it.
3️⃣Budgeting is the message
Finally, you must also consider a reasonable cost. A three-day luxury stay in the Bahamas might not be accepted by the tax authorities as a “normal” staff party. 🏝️
On the other hand, the event doesn’t have to be extremely frugal either. As long as you stay within a realistic budget, the IRS will accept the cost as a deduction.
Tax deductibility vAT staff party
In addition to the tax deductibility of the total costs, it is also important to look at the VAT rules. Because on which expense items exactly can you recover vAT?
VAT on food and beverages 🍽️
For vAT, it makes a difference whether you organize the staff party yourself or outsource it to a caterer or restaurant. If you manage everything yourself, you can fully deduct the 6% VAT on nutrition and drinks.
Attention!
An exception applies to alcoholic beverages, view conditions here!🍾
On the other hand, if you rent a caterer or restaurant, the vAT on those services is not deductible. However, with a caterer who only provides the meals without service, you may recover the 6% vAT % on the food.
Other expenses such as decorations and entertainment 🎊
Fortunately, there is good news for other expenses such as decoration, entertainment or entertainment. On these, you can fully recover the vAT, regardless of whether you arrange them yourself or outsource them.
Want to add a festive touch with balloons or a photobooth? No problem, the vAT is deductible. Did you book a dJ or a magician? Those costs are also eligible for vAT deduction.🪄
Practical tips for staff party organizing
- Keep good records of your expenses with an accounting software like Dexxter!
- Split your invoices if necessary: This way you can easily keep the deductible and non-deductible vAT apart.
Ready for a tax-optimized staff party?
We hope this article has given you enough info so that you can organize a fiscally optimal staff party! If you respect the rules on collective social benefit and vAT deduction, then you needn’t worry too much about the financial side.
So you can concentrate fully on organizing a pleasant get-together with your employees. 🥂
