All criteria of a company event must also be satisfied for virtual events.
The tax allowance of €110 is also applicable to virtual company events.
In practice, it will be necessary to document the possibility of a social exchange.
Many companies are cancelling their planned Christmas parties due to the current coronavirus pandemic. In the search for alternatives, many managers are considering virtual options that can replace the usual celebrations with staff. From a tax perspective, it is important to understand the conditions under which a virtual event can be considered a company event.
Definition of a virtual business event
The tax authorities have not issued any relief or special regulations on virtual events in the context of the coronavirus pandemic, so the conventional definition applies:
- The virtual company event must be open to all members of the company or a part of the company. It is also sufficient to invite an organisational unit, but this also requires all employees to be invited; there must be no preferential treatment, for example according to turnover, function, hierarchy or any other type.
- In practice, being open means that all employees must be invited, but they do not have to participate. In this case, the actual participants are not taken into account.
- The participants of the company event must also consist mainly of active employees, their companions, temporary workers and group employees.
- It is an event at company level with a social character.
These elements can be implemented without difficulty at virtual events. However, the last requirement, that it must be an event at company level with a social character, is more tricky. According to case law, it has been decided that a mere visit to the theatre does not constitute a company event because the social character criterion is not satisfied. The requirement would be met if the participants went out together after the theatre visit, for example for a meal or just a drink. In this case, all components including the theatre visit would qualify as a company event. The social character of a virtual event is therefore also a crucial factor.
In order for an event to generate a monetary benefit, something must be given to the employees at a virtual event. This can be visual or acoustic performances, for example allowing employees to access a band performance via video conference. Packages with physical objects that are sent home to the employees are another option. There are many possibilities, ranging from (alcoholic) drinks to food and various other (gift) items.
In order for the social character criterion of virtual company events to be fulfilled, it must be possible to exchange ideas with each other or to actively participate, for example within the framework of programme items that are specifically designed for interaction.
These possibilities are not provided if, for example, the board of directors gives a speech, presents key figures and then offers further professional or entertaining elements. Participants will consume their drinks and food during the presentations, after which the event ends. In our view, the possibility to ask questions during the event is also not sufficient to constitute an exchange with a social character.
Instead, there must be programme points and time slots within the virtual event in which personal exchange can take place. These should also be documented on the agenda. Offering a virtual exchange and communication among the participants would be a conceivable alternative. However, it is not necessary to check whether all participants have actively contributed. Even at an in-person Christmas party, it is not necessary to check whether people have sat alone in the corner and not communicated with others, although this would have been possible.
It should be noted, however, that for an overly large circle of participants, even simple open exchange in the entire group may not be sufficient to constitute the social character. In a virtual setting, possibilities must be created that enable even a large group to have an actual exchange. One example is dividing the participants into smaller groups after the general part so that they spend the social part together. Only with such scenarios can it be guaranteed that every participant is able to actively take part in the social element. Anyone who has participated in a larger conference call will know the problem. Just the idea of being in a virtual room with 1,000 microphones or cameras switched on will evoke all kinds of emotions, but certainly not that this will create a monetary benefit.
There are no limits to creativity in fulfilling the requirement - be it participation in interactive games for smaller groups or the possibility of moving from one (virtual) topic table to the next. For the subsequent tax assessment, the total costs of the event are added up and allocated proportionately to the individual participants. All costs incurred are to be taken into account, including (for example) any postage costs for sending materials. If the allowance of € 110 has not yet been applied twice for the current year, this can also be deducted. For documentation purposes, an agenda and the lists of participants should be filed in addition to these lists. The specific organisation of the social part of the event should be described in more detail than would be the case for a conventional event.