A celebration organized by an employer for an employee may give rise to taxable income according to the Finanzgericht Münster.

While an employer organizing a big celebration for an employee is certainly a welcome sign of appreciation, we at GRP Rainer Rechtsanwälte caution that excessive festivities may result in additional taxable income for the employee.

In the instant case, a foundation had invited people to a big all-expenses-paid celebration to mark the chairman of the board of trustees reaching a milestone birthday. The tax office recorded all the payments made by the foundation due to the celebration as income from self-employment, taking it into account for income tax purposes.

However, in a ruling from 02.20.2019, the Finanzgericht Münster held that only 10% instead of 100% of the foundation’s expenses should have been treated as taxable income (Az. 7 K 4084/16 E). It attributed 90% of the festivities to a celebration of the foundation, which had been in charge of the guest list. The Court went on to state that of the 261 guests, 25 were personal guests of the employee celebrating his birthday, noting that this was not insignificant. The Court therefore concluded that 10% of the expenses were to be considered taxable income.

Lawyers experienced in tax law can advise in the event of tax disputes. 

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