09.07.2015 15:07

KHO: Departmental events for recreational purposes are tax deductible

Supreme Administrative Court: Departmental events for recreational purposes are tax deductible

 KHO 18.6.2015 T 1708 

On June 18th The Supreme Administrative Court ruled on the deductibility of the value added tax paid by companies in connection to recreational events for departments or units within the company. In this important ruling, the Supreme Administrative Court considered such VAT payments to be deductible.

The important question was whether or not recreational events for company staff could be organized independently for each department or unit within their respective budgets. Such events can include food, drink and entertainment. The Supreme Administrative Court did not consider work-related programs to be a requirement for the deductibility of the VAT, nor did it consider the serving of alcohol or differences in budgets between departments a limitation to the deductibility. Due to the nature and purpose of such events, the Supreme Administrative Court considered them to be more closely related to the company business than to the spare time of the employees. 

The decision confirms the previous practice (KHO 1998/1229), which has been widely followed by companies, regarding the deductibility of costs for departmental recreational events regardless of the placement, timing or program of the event itself.

Companies that have chosen not to deduct such costs or that have been taxed for such costs can apply for repayment for up to three years after the end of the fiscal year.

According to the Supreme Administrative Court costs for recreational events are deductible regardless of how fun or enjoyable they are, so remember to put the costs of the company summer parties on the tax deductible account!