Milestone after 9 years: BFH confirms the wording of Art. 19 (1) sentence 1 no. 1a EstG

  • 06/19/2024
  • Reading time 4 Minutes

In its decision of March 27, 2024 (VI R 5/22), the German Federal Tax Court (“BFH”) confirmed, as expected, that all employee events are to be considered as company events. The participation of all employees in the company is not required.

With its ruling, the 6th Senate finally provided clarity and ended almost 10 years of uncertainty for practitioners. The topic of so-called employee events was often a contentious issue, particularly in the context of payroll tax and social security audits.

Since the introduction of the statutory provision of Art. 19 (1) sentence 1 no. 1 a EStG (German Income Tax Act) in 2015, my professional colleagues and I (author) have held the legal opinion that has now been clarified by the BFH.

In our opinion, however, the core statement of the Senate is at the center of the BFH’s decision: “The legal text always prevails!”.

1.    Operative provisions and main content of the judgment

The starting point in the dispute was a Christmas party to which only board members of the relevant company had been invited. At first instance, the Cologne Tax Court ruled that it was a company event. The 6th Senate confirmed the appeal in favor of the plaintiff and overturned the Cologne tax court’s decision dated January 27, 2022 (6 K 2175/20) with the reasons/arguments set out below.

In the operative provisions of the judgment discussed here, the BFH states:

a.    All employee events are company events pursuant to Art. 19 (1) sentence 1 no. 1a sentences 1-3 EStG, even or especially if such event is not open to all members of a company or part of a company.

b.    The definition of a business event in Art. 40 (2) sentence 1 no. 2 EStG corresponds to the legal definition in Art. 19 (1) sentence 1 no. 1a sentence 1 EStG, with the result that all employee events can be subject to a 25% flat rate of payroll tax.

c.    This results in a consequential exemption from social security contributions/reimbursement of contributions for previous years.

In subsection 16 of the above-mentioned ruling, the 6th Senate clarifies that “...from the 2015 assessment period, a company event therefore only requires an event at company level with a social character”.

Furthermore, with regard to the possibility for all employees to participate, the Senate states in subsection 18 that “....the event being generally open to all members of the company or a part of the company is exclusively a prerequisite for the granting of the € 110 allowance and can therefore not be used as an (unwritten) restrictive criterion for the definition of a company event pursuant to Art. 19 (1) sentence 1 no. 1a sentence 1 EStG”.

2.     Significance for practice

The decision has a significant impact on current tax and social security practice, as the clarification is accompanied by a retroactive effect from January 1, 2015.

This means:

a.    Check all event-related tax payments, also for the past, i.e., all calendar years that are not time-barred/finally audited.

b.    Correct the payroll tax treatment pursuant to Art. 37b EStG or individual taxation to the flat rate of 25 % (plus annex).

c.    File applications for contribution refunds with the pension insurance fund for social security contributions paid for events in previous years.

d.    Review your event-related processes and adapt them to the – now clear – legal situation.

Should you have any questions, we will be happy to provide you with advice and assistance at any time.

Andreas Bode – Tax Advisor/Partner (Employer Consulting)
Felix Hermsdorf – Finanzwirt (Financial Advisor)/Director (Employer Consulting)
Simone Kriegel – Pension Advisor/Director (Employer Consulting)

Many thanks to Mr. Hermsdorf and Ms. Kriegel for their valuable contributions to this article.

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Authors of this article

Andreas Bode


Certified Tax Advisor

Simone Kriegel


Certified Pension Consultant

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