You must have just as much educational content on the company trip to avoid tax liability
There can be many reasons a company chooses to take its employees on a company trip. Such trips can, among other things, improve the social environment in the workplace, create closer ties between employees, strengthen the company culture, and facilitate professional and educational replenishment. But, can the employer cover the costs of the company trips without tax consequences for the employees? This question often arises when planning company trips. The General Manager of event travel agency Motel Agency Ketil Iwe Thorsteinsen sat down with Associate Jon A. Neder at Advokatfirmaet Hjort DA to get a thorough overview of how much professional content you must have on a company trip to avoid tax liabilities for employees. Here is what the expert in the field concluded:
Tax on company trips
There are many tax rules regarding the employer's coverage of costs for company trips. The purpose of the company trip can in that context be decided based on tax. In principle, the employer's coverage of costs for travel, hotel accommodation and food is a taxable benefit for the employees. The event can still be tax-free according to the rules for reasonable welfare measures, or as an educational trip for the employees.
The tax exemption for reasonable welfare measures applies to measures aimed at the employees and intended to increase well-being and cohesion in the workplace and the connection to it, typically in the form of a joint event. In order for a company trip to be tax-free as a reasonable welfare measure, it must be offered to all or a significant group of the company's employees and cannot exceed two nights. In addition, the trip must be affordable, for example, not cost more than what is usual in such contexts. Among other things, costs for the annual company Christmas Party covered by the employer will be covered by the exemption for reasonable welfare measures.
The tax exemption for study trips is justified in other respects. The employer often has a vested interest in the employee staying up to date within their profession. The restrictions that apply to reasonable welfare measures therefore do not apply to study trips as a starting point. In return, there are requirements for educational content.
Requirements for Educational Content
In order for the employer's coverage of travel with professional content to be tax-free for the employees, the trip must have professional content that involves (i) maintaining the employee's professional competence and / or (ii) keeping the employee up to date with developments within the profession.
The professional content must be relevant to the employee's professional practice. If the course / seminar etc. applies to topics of more indirect interest to the profession, such as social policy or wage policy, the benefit will be taxable. The professional relevance in principle must be assessed individually for each participant on the trip, but can also be assessed together, for example, a group of employees who belong to the same department and have the same work tasks.
What is professionally relevant to the employee is difficult to state in general, as this depends on the individual employee's specific work tasks. For example, architects will benefit from hosting a conference abroad in order to keep up to date with the professional development within their profession. It is important to carefully plan in advance what will benefits the individual employee will have from these conferences in question and that you follow through with such programs, as the tax authorities will often require that the specific relevance for the employee's professional practice is documented afterwards.
How long does the tax exemption last?
The tax exemption also includes coverage of costs for board and lodging in connection with the conference, as well as reasonable social measures in connection with the study trip, such as joint dinners for the participants after the academic program has ended for the day. It is a condition that the costs do not exceed what is usual for such contexts.
If the trip has elements of both professional and private purposes, such as extended holiday stays, an overall assessment must be made. The decisive factor is whether the academic content appears to be the main purpose of the trip. If the tax authorities come with the conclusion that the main purpose of the trip is of a private nature, the entire trip will be taxable, with the exception of the parts that only apply to professional purposes, such as entrance fees for attending a conference.
The benefit of an extended holiday stay at the employer's expense may exceptionally be tax-free, if (i) the professional part of the trip lasts for at least two days, (ii) the extension lasts for a maximum of two days, and (iii) the employer does not have to pay more for the extended stay than for a correspondingly shorter, pure study trip.
Furthermore, the tax exemptions for study trips and affordable welfare measures can be combined. If the employer invites all employees on a company trip lasting a maximum of two nights, and arranges courses for the remaining days, the entire company trip will be tax-free. *** If the company is planning a corporate trip that does not trigger tax liability for the employees, there is a lot to take care of. The above does not constitute a complete overview. Contact a lawyer if you are unsure of the consequences and do not want to give employees an unpleasant surprise when the tax settlement arrives.