VAT can be deducted on alcohol, SPA and gym at a company party
A service consisting of organising a meeting for employees and co-workers is a comprehensive service on which a taxpayer is entitled to deduct VAT, according to a judgment of the WSA in Łódź of 5 October 2023, case ref. no. I SA/Łd 587/23.
In the case under analysis, the company wanted to organise an integration meeting for employees and co-workers, purchasing a comprehensive service for the organisation of the event (accommodation, meals, including alcoholic beverages, possibility to use the gym, SPA and swimming pool) and asked the tax authority whether it could deduct VAT on such a service. The tax authority refused to allow a tax deduction for the purchase of alcohol, use of the gym, spa and swimming pool. The case therefore went to court.
The WSA in Łódź disagreed with the position of the tax authority and overturned the interpretation.
– In its ruling, the court emphasised that the service consisting in the organisation of the aforementioned events is a comprehensive service, which also includes ancillary services, such as accommodation, catering, refreshments, including alcoholic beverages, attractions during the trip, the possibility of using a swimming pool or wellness area. All these activities together constitute the main service in the form of organisation of an event, such as a conference, training course or anniversary celebration, while additional services are of a supplementary nature to the main service, serving to make the main service more attractive,” Natalia Zborowska, a consultant at Thedy & Partners, points out.
The court also explained that none of the components of the event constitutes an end in itself for the company and the company would not be interested in acquiring it in the analysed situation without the other elements. These services must be considered as homogeneous and indivisible from an economic point of view. The exclusion made by the authority with respect to the service of purchasing alcohol and additional services, such as the possibility to use the swimming pool, gym or wellness area, was assessed by the court as artificial and not justified against the background of the current market conditions in which the business activity is conducted, when the organisation of such events along with additional services is a common element of marketing activity for an economic entity.
– The court also explained that a taxpayer is entitled to deduct VAT on a comprehensive service, once the statutory prerequisites are met,” adds Natalia Zborowska.
The judgment of the Voivodship Administrative Court in Łódź is not final and binding.