Specifically, up to January 01, 2019, team building costs have been considered as a profit, i.e., employee benefits, and therefore, companies had to pay the income tax for this disbursements, as well as contributions for obligatory social security based on income.
However, the amendments to the Personal Income Tax Law stipulate that team building costs are not subject to taxation if the requirements of certain (by)laws have been met. The enforcement of the Regulation on exercising the right to tax exemption for organizing recreation, sport events and activities for employees has closely regulated the requirements to be fulfilled by companies to achieve tax exemption on this basis.
This means that companies will be able to, for instance, buy exercise equipment which will be placed within the business premises, rent an indoor basketball or futsal court, take their employees mountain climbing, or to dinner, without being obliged to pay income taxes and contributions. As of now, these disbursements are as of now considered company’s business expenditures.
In order to be entitled to tax exemption, companies must first meet two general requirements: