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Most finance teams already know that VAT on staff entertainment is a complicated area. What is less well known is what happens when a corporate event extends beyond employees to include their families. Does inviting partners and children to a company away day or end-of-year celebration automatically block the VAT reclaim on the whole event?
In a judgment of 7 August 2026 (I FSK 1980/23), Poland’s Supreme Administrative Court confirmed that it does not have to. And the reasoning behind it is worth understanding, because it reflects a broader principle that applies across many jurisdictions.
The Supreme Administrative Court, upholding an earlier decision of the Regional Administrative Court in Wrocław, held that including employees’ family members in corporate integration events does not automatically eliminate the right to deduct input VAT on the related costs.
The court’s reasoning was that where the primary purpose of the event is business-related, specifically improving employee motivation, loyalty, and workplace atmosphere, the costs are considered indirectly connected to taxable business activity. That indirect connection is sufficient to support VAT recovery, even where family members attend alongside employees.
The ruling does not change the separate restrictions in the Polish VAT law. Input VAT on catering and accommodation services is generally non-deductible, unless they form part of a single, comprehensive event organisation service rather than being invoiced separately.
The principle underlying this ruling is not unique to Poland. Across many VAT jurisdictions, the question of whether input VAT on staff entertainment and corporate events is recoverable turns on the same core test: what is the primary purpose of the expenditure, and is there a sufficiently direct or indirect link to the business’s taxable activities?
Where the primary purpose is genuinely business-related, such as building team cohesion, improving retention, or boosting employee performance, a strong case for VAT recovery may exist. Where the expenditure is primarily for personal enjoyment or private benefit, recovery is more likely to be blocked.
The presence of family members does not automatically shift the event into the private benefit category, provided the business purpose remains dominant and can be demonstrated.
Failing to document the business purpose: The most common reason VAT recovery on corporate events is denied is not that the event fails to qualify, but that the business cannot demonstrate why it was held. A clear record of the event’s objective, whether that is a team away day, a recognition event, or an annual conference, provides the evidential basis for a reclaim.
Treating all entertainment costs the same: Not all costs associated with an event follow the same VAT rules. In many jurisdictions, catering, hospitality, and accommodation are subject to specific blocking rules that apply regardless of the event’s purpose. Understanding which costs are fully recoverable, which are partially recoverable, and which are blocked entirely is essential before submitting a claim.
Assuming family attendance always blocks recovery: As the Polish ruling illustrates, the presence of non-employees does not automatically disqualify a claim. What matters is whether the event retains its business character. A company event that happens to include partners and children is different from a holiday or personal celebration funded through the business.
Not reviewing across all jurisdictions: For businesses operating across multiple markets, the rules on staff entertainment VAT recovery vary significantly. What is recoverable in one country may be blocked in another. A consistent assumption applied across all markets is a reliable way to either overclaim or underclaim.
If your business runs corporate events that include employees’ families and you have not been reclaiming the input VAT on those costs, it is worth reviewing whether a claim is available. The key questions are:
For businesses operating across multiple European markets, the answer to each of those questions may differ by country. Our guide on VAT compliance requirements covers what businesses need to consider across jurisdictions.
Getting the analysis right for each jurisdiction, rather than applying a single blanket approach, is where the recovery opportunity typically lies.
For a detailed breakdown of what qualifies for VAT recovery on staff entertainment and where the limits apply, see our guide on reclaiming VAT on staff entertainment.
If your business regularly runs corporate events and has not reviewed the VAT recovery position on those costs, there may be unclaimed input VAT across multiple periods and multiple jurisdictions.
VAT IT works with businesses to identify and recover VAT on entertainment and event costs across 70+ countries, on a success-fee basis with no upfront cost.
Get in touch with our team to find out what your business could be recovering.
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