When organising corporate activities, within the tax rules the Expense Allowance Scheme (WKR) is relevant.
Under the Expense Allowance Scheme, employers can allow their staff to take advantage of reimbursements and other rewards tax-free, up to a fixed percentage of 1.2%. It incorporates, for example, Christmas packages, dinners, a bicycle, staff parties and corporate activities. Under the Expense Allowance Scheme, companies no longer need to record these extras for each employee and can instead incorporate them into one single calculation for the company.
In the event that these costs exceed the 1.2% limit, the employer will be required to pay tax on the reimbursements at a rate of 80%. Based on an average salary of €33,000 per year, nearly €400 can be freely used within the Expense Allowance Scheme. At an average price of €75 for a corporate activity, this amount is usually easily achievable.
Tips for reducing Expense Allowance Scheme headaches:
- Combine the activity with a meeting including lunch and/or dinner. Request two invoices, one for the meeting and one for the activity. Catering and room hire usually account for half of the total, which means an initial saving.
- Activities that can be classed as team-building exercises fall outside of the Expense Allowance Scheme. Note that cooking a meal with your colleagues and recording this as training will not be accepted by the tax authorities. Knowledge and skills development for work purposes are important, and training must take place during working hours. Consider activities such as team roles and coaching. The costs of such activities are usually much higher.
- Combine the activity with another element of the Expense Allowance Scheme, such as a Christmas package. Instead of a Christmas package, you could also offer a skiing activity at the end of the year - two in one.
- Set up a staff association through a solicitor, appoint a board and arrange equal contributions from employees and the company. The employer's contribution to the staff association is considered part of the salary and is therefore taxable. The costs of excursions paid for from the association's budget fall outside of the Expense Allowance Scheme.
Please consult your accountant or the tax authorities for further information.