Major sporting events such as the 2026 and 2027 FIFA World Cups offer companies excellent opportunities to nurture business relationships, forge new connections and strengthen existing partnerships, be that at the stadium, as part of exclusive hospitality or at a big screen event: such occasions offer companies a wide range of relevant possibilities. As well as being opportunities to meet in person, they serve to enhance a company's public image and can help to establish and strengthen sustainable business relationships. The associated expenses – such as those for hospitality, advertising measures or gifts – are tax-deductible, provided they are business-related, properly documented and reasonable in terms of their amount. For tax purposes, it makes no difference whether companies provide their business partners with tickets for a World Cup match at one of the host venues in the USA, Canada and Mexico (2026) or in Brazil (2027) or invite them to a social gathering at a beer garden in front of a big screen. Both forms of hospitality constitute expenses that are potentially tax-deductible but are each subject to different tax rules. The following comments are based exclusively on the German taxation viewpoint , i.e. they relate only to events taking place in Germany. A cross-border situation may give rise to specific issues that require separate consideration, such as whether a US permanent establishment incurs the expenses under US law or whether business invitations can be extended to foreign contractual partners to whom German tax law does not apply. Value added tax – unlike income tax – is generally based on the place where services are provided.
Risk of the invitee being taxed
Gifts received in connection with a business invitation generally constitute taxable income for the recipient. If the owner of the company extending the invitation attends events, for tax purposes the benefits received are treated as a withdrawal. Employees of a customer, on the other hand, must declare the gift as income received from a third party. In both cases, this results in a tax burden which can become an interfering factor in the customer relationship.
With the aim of lessening the effects of this problem, in section 37b German Income Tax Act (EStG) the legislature has introduced the possibility for the host to assume the recipient's tax liability in the framework of the business invitation. A flat-rate tax of 30 % applies, provided that the expenses per recipient per year or per individual gift do not exceed EUR 10,000. The host should therefore bear in mind, even before extending the invitation, that there may be tax implications for the recipient – and, to ensure the invitation is successful and straightforward, ideally cover these costs themselves so that the actual purpose of the shared event is not lost sight of.
The recipient must be informed about the decision to assume the flat-rate tax. In practice, this can be done, for example, by including a brief note in the invitation in which the host states that they will cover the tax payable on the gift. Such information not only provides legal certainty but also helps to ensure that the invitation can fulfil its intended purpose – to promote and maintain business relationships – without friction.
The option of the lower flat-rate tax can also be applied to gifts to the company's own employees, provided that such payments constitute income subject to income tax for the employee.
Deduction of the expenses as business expenses of the host
Expenses incurred in the course of business can generally be deducted as business expenses. The decisive factor is that they must be actually or financially linked to the operation of the business and serve this purpose. However, expenses incurred for private purposes – such as invitations to friends or family members, for example in connection with a birthday – are not tax-deductible under section 12 (1) German Income Tax Act (EStG). That is why an invitation should make the business purpose clear.
In practice, when it comes to invitations extended to business partners or the company's own employees, the tax authorities generally assume that there is a business-related reason for the invitation. As a rule, it is sufficient to attach the invitation for each participant – which specifies the business purpose – to the accounting documents (Federal Ministry of Finance letter of 11 July 2006 – IV B 2 – S 2144 – 53/06 (Federal Tax Gazette I p. 447)). Nevertheless, in some cases, the private aspects of an invitation may be so predominant that the business purpose is pushed into the background. In such cases, it may not be possible to deduct the costs as business expenses. It is essential to bear this in mind when writing the invitation. It is definitely advisable to consult a tax advisor in advance.
Deductibility of advertising and hospitality expenses and gifts
The amount of expenses that can be offset in connection with a business invitation depends on what exactly is being given. In practice, the total costs tend to consist of the admission price for the sporting event, hospitality expenses and various advertising measures, such as flyers or banners.
While (reasonable) advertising costs are fully deductible, only 70 % of (reasonable) hospitality expenses can be deducted for income tax purposes. The rules regarding the ticket itself as a gift are considerably more restrictive: a tax deduction for gifts to persons who are not employees of the taxpayer is only possible if the value of the ticket does not exceed EUR 50. If the price is higher than that – which is almost always the case for major sporting events such as the Football World Cup – the ticket is not tax-deductible at all. If the expenses that would normally be tax-deductible are, in the specific case, unreasonably high, these also cannot be deducted at all. The criterion of unreasonableness must be assessed on a case-by-case basis and may be measured, for example, against the company's turnover.
The make-up of the total costs of the invitation is therefore of decisive importance for the host.
Particularly in the case of hospitality packages booked on a flat-rate basis at stadiums or event venues, it is not always clear which portion of the costs relates to admission, hospitality or advertising. Such hospitality packages for the Football World Cup, for example, may include not only the ticket itself, but also hospitality, transfers or special events such as exclusive guest appearances. In such cases, the tax authorities estimate the relevant amounts in proportion to the total sum, applying appropriate criteria. Various methods may be used for this purpose (German Federal Fiscal Court, judgment of 23 November 2023 – VI R 15/21). Setting prices in a contract may also be a beneficial option in this context.
For a comprehensive package in a VIP box, which includes not only access to the event but also hospitality and promotional services, the tax authorities routinely apply a 40:30:30 breakdown for the sake of simplicity, i.e. 40 % for advertising, 30 % for hospitality and 30 % for admission (Federal Ministry of Finance letter of 11 July 2006 – IV B 2 – S 2144 – 53/06 (Federal Tax Gazette 2006 I p. 447)). However, this simplification rule only applies if the total price actually includes all three components. If, for example, the package includes only the ticket price and advertising, whilst hospitality is invoiced separately, a different, appropriate basis for apportionment will be necessary. For "Business Seats" which include catering but do not include advertising, a 50:50 split is often applied (Federal Ministry of Finance letter of 11 July 2006 – IV B 2 – S 2144 – 53/06 (Federal Tax Gazette 2006 I p. 447)). All these guidelines are intended to serve as benchmarks to facilitate estimates that are as accurate and transparent as possible. However, the taxpayer is not bound by these: if he can provide evidence of a different, more precise, breakdown on the basis of appropriate documentation, he is, of course, entitled to submit this to the tax office.
Requirement to provide proof of hospitality expenses and gifts
Expenses incurred for gifts to persons who are not employees of the host as well as expenses for entertaining persons for business purposes must be recorded individually and separately from other business expenses (section 4 (7) first sentence German Income Tax Act (EStG)). Otherwise, these expenses cannot be deducted as business expenses on grounds of this formality alone.
With regard to hospitality expenses, further documentation requirements must be met in order for them to be recognised for tax purposes for the benefit of the host. Records must be kept of the venue and date of the hospitality, those participating, the specific occasion and the amount of the expenses. The reason, in particular, must be described clearly and in a way that can be verified; generalised information such as "maintaining business relationships" or "business meal" are not sufficient for this purpose. Instead, more specific details are required, such as "contractual negotiations with business partner regarding the sale of machinery". This is the only way to ensure that the tax office can carry out a later assessment. The relevant records must also be signed by the host.
If the hospitality takes place in a restaurant, less stringent requirements apply. In this case, it is sufficient to record the occasion and the names of the participants. In addition, the restaurant entertainment receipt must be included with the documents to ensure that the documentation is complete.
Deduction of expenses incurred for the benefit of a company's own employees
The full costs of admission fees payable by the company for its own employees for a sporting event can be treated as business expenses, provided that participation is primarily for business purposes. For the tax office to be able to see that this is the case, a brief description of the duties performed by the employees involved should be included with the documents – for example, what tasks they carried out on site. Operational business activities include, for example, handing out t-shirts, flyers or other promotional material to guests. Meetings with business partners aimed at maintaining, strengthening and establishing business relationships are also included activities.
Hospitality expenses provided by an employer to its own employees are also regarded as business expenses and are therefore not subject to the income tax deduction restriction. In such cases, the costs can be fully deducted as business expenses. However, invitations issued for business purposes where both the business partners and the host's own employees are present – such as an invitation to mark the conclusion of a business deal – must also be considered. In such cases, the statutory deduction restriction for hospitality expenses also applies to the portion of the costs attributable to the hospitality for the company's own employees (Federal Ministry of Finance letter of 22 August 2005 – IV B 2 – S 2144 – 41/05 (Federal Tax Gazette 2005 I p. 845; § 4 (5) first sentence no. 2 German Income Tax Act (EStG)).
In the case of invitations issued as part of corporate hospitality, the host company must therefore be able to demonstrate clearly that its employees' participation – including the provision of hospitality – did not merely take place "by chance" in connection with an invitation extended to a customer but was, in fact, business-related. This should be the case, for example, if the employee responsible for the invited customer attends in order to answer any questions the customer may have about the host company's product or service.
VAT treatment – deduction of input tax
The VAT treatment of services provided in connection with an invitation is also very complex. If all services – such as admission and hospitality – are booked as a package, the tax authorities also accept a pro rata allocation of the individual components for the sake of simplicity. If the host company is unable to provide proof of a different detailed allocation, the tax authorities generally assume that the expenses are divided equally between hospitality and admission for business associates on the one hand and the company's own employees on the other (Federal Ministry of Finance letter of 28 November 2006 – IV A 5 – S 7109 – 14/06 (Federal Tax Gazette 2006 I p. 791)).
As the provision of hospitality to customers or other business partners is regarded as a non-monetary service provided for business purposes, it is not subject to VAT and is therefore not taxable within the meaning of section 3 (9a) no. 2 first alternative German Value Added Tax Act (UStG).
When an employer extends gifts to its own employees, there are a number of specific VAT particularities to bear in mind. In principle, such benefits are non-cash benefits and are therefore subject to VAT (Federal Ministry of Finance letter of 28 November 2006 – IV A 5 – S 7109 – 14/06 (Federal Tax Gazette 2006 I p. 791)). However, an exception applies to mere tokens of appreciation from the employer: small gestures, such as hospitality expenses up to a value of EUR 60, are not subject to VAT (section 1.8 (3) German VAT Application Decree (UStAE)). Furthermore, if the hospitality is primarily in the interest of the company, no VAT is incurred either, provided that the hospitality remains reasonable in terms of its amount at all times. It is also important to make a distinction from income tax law here: if the threshold of EUR 60 is exceeded, the relevant hospitality expenses are treated as income and are subject to income tax and social security contributions (R 19.6 (2) German Guidelines on Wages and Salaries (LStR)). The rules governing VAT and income tax are not congruent in this respect.
The deduction of input tax is generally permitted subject to the general requirements set out in section 15 German Value Added Tax Act (UStG). However, it does not generally apply to benefits extended to the company's own employees as they are not acting as entrepreneurs. There is only an exception where the benefit is granted in the predominant business interest. If, on the other hand, benefits are obtained in connection with an invitation to business partners, the host is generally entitled to deduct input tax in accordance with section 15 (1) German Value Added Tax Act (UStG).
With regard to hospitality expenses, section 15 (1a) second sentence German Value Added Tax Act (UStG) must be observed. Accordingly, input tax can be deducted to the extent that the hospitality expenses are considered reasonable in terms of amount. If the expenses are to be regarded as reasonable, the host is entitled to deduct the input tax in full. The 70 % restriction under German income tax law has no effect on VAT. The fact that the underlying transaction is not subject to VAT does not preclude the deduction of input tax. Further restrictions apply to gifts extended to business partners, such as invitations to a World Cup match. As the threshold of EUR 50 is regularly exceeded in such cases, input tax deductions are generally excluded in accordance with section 15 (1a) first sentence German Value Added Tax Act (UStG). Classification as an item provided free of charge pursuant to section 3 (9a) German Value Added Tax Act (UStG) – which would result in the possibility of deducing input tax – is also out of the question as the gift is not extended for purposes unrelated to the business but is made in a business context (Federal Ministry of Finance letter of 28 November 2006 – IV A 5 – S 7109 – 14/06 (Federal Tax Gazette 2006 I p. 791)).
Interface with corruption: long limitation periods for tax evasion
In a business context, invitations can be sensitive to criminal law implications if they do not merely serve as a means of maintaining contacts or representing the company in the usual fashion but instead take on the character of consideration for preferential treatment in the past or in the future in connection with the awarding of contracts or the securing of other business advantages. Potential offences include accepting bribes and offering bribes in the course of business (section 299 German Criminal Code (StGB)). This typically simultaneously constitutes tax evasion (section 370 German Tax Code (AO)). Such payments are therefore not only risky from the perspective of criminal law but they are also not tax-deductible (section 4 (5) first sentence no. 10 German Income Tax Act (EStG)).
Although – as provided in section 78 (3) no. 4 German Criminal Code (StGB) – a limitation period of only five years applies to cases of accepting and receiving bribes in the course of business (section 299 German Criminal Code (StGB) offences), longer time limits apply to cases of tax evasion. If tax evasion is committed in connection with such a gift, payment or related benefit, the tax assessment period is already ten years in accordance with section 169 (2) second sentence German Tax Code (AO). In particularly serious cases of tax evasion both the limitation period under criminal law and the corresponding tax assessment period are extended to fifteen years. The legal basis for this is section 376 (1) first half-sentence German Tax Code (AO) in connection with section 171 (7) German Tax Code (AO) which serves to ensure that the tax assessment period does not expire during the criminal investigations.
It is therefore strongly advisable not to take a reckless approach to business invitations and, when in doubt, to seek expert advice at an early stage. Decisions which have not been properly thought through can quickly have serious consequences – and have cost many people their careers in the past. The following principle applies: "Good intentions don't automatically lead to good results."
