Christmas parties and gifts: Are you on top of the VAT deduction?
New rules on interest on VAT corrections have been introduced, making it extra important to keep track of the deduction rules for Christmas parties and gifts.
This year, new rules came into force regarding interest on VAT and tax returns. This means that you as a business risk having to pay interest if you take deductions for more than you can afford.
Catering at Christmas parties
The main rule for employee hospitality is that companies cannot deduct VAT, but a distinction is made between a) events in restaurants and the like and b) events on the company's own premises.
If you hold the Christmas party in a restaurant or similar, 25% of the VAT can be deducted.
However, if the Christmas party is held on your own premises, there is no VAT deduction because it is not a restaurant service.
Other costs related to the Christmas party
If your company rents rooms, equipment or other items for a Christmas party that isn't held on your own premises, you can fully deduct the VAT on these expenses.
However, you do not get a deduction for entertainment expenses, etc.
Christmas gifts for employees
Christmas gifts to employees are not eligible for VAT deduction as they are considered a personnel expense.
Also read the article: Is your employee at risk of a tax hit for Christmas gifts?
More information
You can read more about the new rules for VAT corrections here: No more interest-free retrospective VAT and tax returns.
If you need advice or assistance in connection with tax, VAT and duties, you are welcome to contact inforevision's tax department. You can read more about us here.
Flemming Saabye
Head of the tax department
T 39 53 50 38
