Weihnachtsfeier 2026: 110 Euro Freibetrag richtig nutzen

The 2026 Christmas party is the first one under a new rule: since January 1, 2026, you may only apply the flat 25 percent wage tax rate to income from a company event if attendance is open to all members of the business or of a division. The exclusive management dinner has therefore dropped out of the favourable flat-rate scheme. Here is what the 110-euro allowance covers, which costs count towards it and how to get the payroll treatment right.

What counts as a company event

Under § 19 (1) sentence 1 no. 1a EStG, a company event (Betriebsveranstaltung) is an event at company level with a social character. The classics are the Christmas party, the company outing and the summer party. Everything you provide to your staff and their companions on such an occasion is in principle wages, so subject to wage tax and social security contributions unless an exemption applies.

Purely professional events are a different matter: a staff meeting, a training session or a strategy workshop is not a company event. If an event contains both elements, you may split the costs and include only the social part in the 110-euro calculation.

The 110-euro allowance: two parties per year

Benefits granted on the occasion of a company event are not treated as wages to the extent that they do not exceed 110 euros per event and participating employee (§ 19 (1) sentence 1 no. 1a sentence 3 EStG). This applies to up to two company events per calendar year (sentence 4).

Two details decide whether the exemption holds in practice:

• An allowance, not a threshold: if the party costs 150 euros per head, only the excess of 40 euros is taxable, not the full amount.
• Open to everyone: the allowance requires that attendance is open to all members of the business or of a division. A party for a hand-picked group does not get the 110 euros.

From the third party of the year onwards, the benefit is fully taxable. You may choose which two events to treat as privileged, sensibly the two most expensive ones.

What goes into the 110 euros

This is where most mistakes happen. You have to include all employer expenses including VAT, regardless of whether they can be attributed to an individual (§ 19 (1) sentence 1 no. 1a sentence 2 EStG). The so-called external setting counts too:

• food, drinks, snacks
• room rental, decoration, technical equipment
• music, performers, event agency
• gifts handed over at the event
• travel and accommodation costs, unless settled as tax-free travel expenses

Only notional internal costs may be left out, for example electricity or a share of the wages of your own staff organising the event.

Total costs have to be divided equally among the participants actually present, not among those who registered. The Federal Fiscal Court (BFH) confirmed this in its judgment of April 29, 2021 (BStBl II 2021, 606): so-called no-show costs for people who were catered for but did not turn up increase the amount per head. If you order 60 meals and 40 guests arrive, you divide by 40.

And if someone brings a companion, that share is attributed to the employee. There is no second allowance for the companion.

Worked example

A GmbH invites all 25 employees to the Christmas party. 20 employees attend, five of them with a partner, so 25 heads in total. Total costs including VAT are 3,750 euros (catering, room, band).

• Cost per attending participant: 3,750 euros / 25 = 150 euros
• Employees without a companion: 150 euros, of which 110 euros exempt, 40 euros taxable
• Employees with a companion: 300 euros, of which 110 euros exempt, 190 euros taxable

A single partner at the table therefore multiplies the taxable amount fivefold. That is exactly why the flat-rate option matters.

New since 2026: flat rate only for open events

For the taxable part you can take over the wage tax at a flat 25 percent plus solidarity surcharge and flat-rate church tax under § 40 (2) sentence 1 no. 2 EStG. The big advantage: wages from company events taxed at this flat rate are exempt from social security contributions.

Something changed here as of January 1, 2026. In its judgment of March 27, 2024 (VI R 5/22), the BFH had held that the 25 percent flat rate also applies to events that are not open to everyone, for example a Christmas party just for managers. The legislator overrode that case law with the Steueränderungsgesetz 2025 (promulgated on December 23, 2025, Federal Law Gazette 2025 I no. 363): since January 1, 2026, § 40 (2) sentence 1 no. 2 EStG expressly requires attendance to be open to all members of the business or of a division.

Event	110-euro allowance	25 % flat rate
Open to everyone in the business or division	yes, for two parties a year	yes
Selected group only (e.g. managers)	no	no, since 2026
Third party of the year, open to everyone	no	yes

For a closed event, all that remains is individual taxation at employee level or the flat-rate taxation of benefits in kind under § 37b (2) EStG at 30 percent. The latter is more expensive and subject to social security contributions. A nice gesture for the management team can quickly turn into a noticeable extra cost.

Tip: invite a clearly delimited organisational unit in full, for example an entire department or site, rather than a group picked from across the company. A "division" is an organisationally distinguishable unit, not a freely assembled guest list.

Social security: apply the flat rate promptly

Flat-rate taxed wages are exempt from contributions only if the flat rate is applied with the payroll run for the relevant accounting period (§ 1 (1) SvEV). In its judgment of April 23, 2024 (B 12 BA 3/22 R), the Federal Social Court held that flat-rate taxation applied much later no longer preserves the contribution exemption. In plain terms: the December party belongs in the December payroll, not in a correction next spring.

VAT: here the 110 euros are a threshold

For VAT a different logic applies. In its judgment of May 10, 2023 (V R 16/21, BStBl II 2023, 1023), the BFH held that the 110 euros act as a threshold here: if it is exceeded, the supply as a whole serves the private needs of the staff and the input VAT deduction is lost entirely. Costs of the external setting count as well where there is a single supply, for example a cooking class invoiced as a package.

The input VAT on catering, room rental and equipment is then gone completely, and at a larger party that weighs far more heavily than the wage tax on the last 40 euros.

Checklist for your 2026 party

1. Document the invitation: evidence that all members of the business or division were invited.
2. Keep an attendance list: who actually came, who brought a companion? Without it you cannot allocate correctly.
3. Collect every invoice: catering, room, equipment, performers, gifts, including VAT.
4. Calculate per head and check whether 110 euros are kept.
5. Count the party: is it the first, second or third event of the year?
6. Decide on the flat rate immediately and apply it in the current payroll run.

Plan the party, hand over the payroll

The 110-euro allowance is quickly explained and still error-prone in payroll, because headcount, external setting, companions and the flat-rate deadline all have to fit together. At Buchführungsheld, real bookkeepers review your receipts, calculate the party correctly per head and tell you whether the flat rate is still applied in time, all at a fixed price. If you want to know what your event will cost in tax terms before you plan it, book a free initial consultation.

Frequently asked questions

How high is the allowance for company events in 2026?

110 euros per event and participating employee, for up to two company events per calendar year. It requires that the party is open to all members of the business or of a division.

Does room rental count towards the 110 euros?

Yes. Since 2015, all employer expenses including VAT have to be taken into account, including the costs of the external setting such as room rental, decoration, equipment and event agency.

Can I still apply the 25 percent flat rate to a management-only party?

No. Since January 1, 2026, § 40 (2) sentence 1 no. 2 EStG requires attendance to be open to all members of the business or of a division. For closed events, only individual taxation or § 37b EStG at 30 percent remains, and the latter is subject to social security contributions.

What happens if registered guests do not show up?

Total costs are divided among the participants actually present. Costs for people who did not attend therefore increase the amount per head, as the BFH held in its judgment of April 29, 2021 (BStBl II 2021, 606).