The budget for the upcoming summer party or Christmas party has been approved, and the team is getting more and more excited—but then the accounting department steps in: the issue is taxation. If you don’t calculate this accurately, you risk facing significant back-payments of income tax for your employees or the frustrating loss of the input tax credit for the entire company.
There are also many half-truths circulating about this topic for the year 2026. Has the tax-exempt allowance been increased or not? What happens if guests cancel at the last minute? What about accompanying persons? As a comprehensive update to our existing blog post, this guide clarifies the current facts and shows you how to make the most of your event budget in a way that is both tax-efficient and legally sound.
1. What will be considered a company event in 2026? (The most important change)
Not every after-work gathering qualifies for tax benefits. The law sets clear limits. An event must be of a social nature and take place at the company level to be considered a company event.
The fact is: The recent tax reform bill has enshrined an important detail in law for 2026: Tax benefits apply only if the event is open to all employees of the company or at least to an entire department. This legal clarification regarding company events has effectively put an end to hopes for tax-exempt “exclusive events” for a select group of participants.
The strategy: Invitations based solely on hierarchy (e.g., “For executives only”) or sales figures are not eligible for the tax-exempt allowance under income tax law. Ensure that the group of participants is defined in an inclusive and cross-departmental manner (or includes everyone within a department).
2. The €110 tax-free allowance: What it means (and what it doesn't cover)
For a long time, there has been debate in political circles and the events industry over whether inflationary pressures and rising food and beverage prices would lead to an increase in tax thresholds.
The fact is: The draft of the Growth Opportunities Act originally called for an increase to 150 euros. However, this planned increase in the tax-free allowance was removed during the final legislative process. Even in 2026, the amount will remain exactly 110 euros (gross) per participant.
The Strategy: Use the existing rule strategically. This is a tax-exempt allowance, not a tax-free limit. This means that only the amount exceeding 110 euros is subject to tax. This allowance applies to up to two events per year per employee. If there is a third event, it is fully taxable. However, you have the option to designate the celebration with the lowest per-person cost as the “third” one.
3. The 3 Most Costly Pitfalls: No-Shows, Partners, and Input Tax
Even experienced planners regularly fall into three subtle accounting pitfalls that can put a massive strain on the budget.
A. The “No-Show” Trap
You're planning for 100 people, but on the day of the event it rains and only 80 show up.
The rule: The tax office calculates the per-person costs based on the number of people actually in attendance, not the number of people invited. Fixed costs (such as venue rental or a DJ) are then spread across fewer people, which can cause the amount per person to rise significantly and exceed the 110-euro threshold.
B. Accompanying Persons
The rule: If employees bring their partners along, the accompanying person does not receive their own tax-free allowance. The costs for the accompanying person are fully attributed to the respective employee. So, for example, if the total cost is 160 euros (80 euros for the employee + 80 euros for the partner), 50 euros of that amount is subject to income tax as an excess.
C. Input Tax Deduction
The rule: While with income tax only the amount exceeding the threshold is subject to taxation, VAT law is unforgiving in this regard. For input tax deductions, the 110-euro threshold is absolute. If the gross amount of 110 euros is exceeded by even a single cent, the input tax deduction for the entire event is completely forfeited.
4. What costs are included in the budget?
To determine whether you are within the 110-euro limit, you must add up all applicable costs. This includes not only obvious items such as food and drinks. The gross amount, including sales tax, is always the determining factor.
The following items must be included in the calculation:
- Venue & Services: Venue rental, event technology, decorations, and event management.
- Catering: Food, beverages, and service staff.
- Program: Outdoor team-building activities, such as a teamio pentathlon or a live escape game.
- Logistics: Travel and lodging expenses, provided they are incurred collectively as part of the event (e.g., a shared chartered bus).
- Gifts: Small gifts for the participants to be presented during the celebration.
The teamio Expert Box
A common mistake in a retrospective tax audit: there is a lack of concrete evidence regarding the actual number of participants.
Our experience shows that you should keep an attendance list on the day of the event. Without clear documentation of who was actually present (including their status as an employee or guest), the tax office will, in case of doubt, make an assessment that works against you. A simple but thorough sign-in sheet at the entrance is your best protection against retroactive tax assessments resulting from unforeseen “no-shows.”
5. When the budget isn't enough: Flat-rate taxation
Let’s be honest: By 2026, it will often be nearly impossible to put on a high-quality event with good catering, a beautiful venue, and professional team-building activities for just 110 euros gross per person. But that’s no reason to compromise on quality.
The strategy: If you exceed the tax-free allowance, your employees won’t have to bear the tax burden on their pay stubs. As the employer, you can pay a flat-rate tax of 25 percent on the difference (plus church tax and the solidarity surcharge). This means the event remains completely free of charge for your team.
In this case, don’t refer to “tax costs” when speaking with management; instead, talk about “investments.” The Stepstone Recruiting Report clearly shows that the work environment and a sense of belonging are now key factors for talent. Those who cut corners in the wrong places out of fear of the flat tax will end up paying double later on due to the high costs of recruitment.
Conclusion: Tax law as a basis for planning, not as an obstacle
If you plan your corporate event budget realistically, are aware of the €110 limit, and actively factor tax regulations into your planning, you’ll have greater peace of mind and negotiate with more confidence. Don’t rely on mere estimates. Use 2026 to professionalize your event planning and ensure your event’s ROI (team motivation) is legally sound.
Need a budget review? Do you have an event in mind but aren’t sure how to organize it in a tax-efficient way in 2026? At teamio, we know the pitfalls and can help you get the most out of it for your team—from the initial idea to the final execution.
