Organizing a team building event is a strategy that facilitates interaction and collaboration among members of an organization, with the aim of improving relationships and strengthening the work team. It is a practice that is increasingly common in the corporate environment, as it contributes to increasing employee motivation and retention.
 
Similar to other company expenses, there is a specific tax regime that applies depending on the circumstances. It is important to clearly define the purpose of the team building event in order to correctly categorize the expenses. Additionally, to avoid issues with tax authorities, certain relevant documents and records must be maintained.
 
  1. In cases where the purpose of the team building event is to enhance employee skills in various areas such as sales techniques, time management, or accounting introduction, the costs associated with these training services are not considered fringe benefits but rather deductible expenses in calculating corporate income tax.
Regarding VAT, a taxable person has the right to deduct the tax related to acquisitions if they are intended for use in taxable operations and a justifiable connection exists between them.
 
To justify the deductibility of these services, the entity needs to present:
  • The necessity of providing these services within the activities carried out;
  • The existence of a contract between the parties that includes the service related to the training courses;
  • The services being actually provided and justified through reports or verbal processes.
 
The company must prepare relevant documentation to demonstrate to the tax authorities that the purpose of the team building event was the professional development of the employees. 
 
This documentation may include approval references, documents from training service providers outlining the program activities (courses, course agenda, activities schedule, names of lecturers, participant certificates, etc.), proposals and approvals from the company's management, and plans for supporting professional development initiated internally or by the human resources departments.
 
From an accounting and tax perspective, the trainer can be either an internal employee or an external lecturer, and the required documents will be similar, with a note on the responsibility for their preparation.
 
  1. If the purpose of the team building event is recreational (outings aimed at strengthening relationships and organizing games unrelated to professional development), the tax treatment changes, and the amount spent by the company for each employee becomes a fringe benefit. This entails the obligation to calculate, declare, and pay income tax, social security contributions (CAS), and health insurance contributions (CASS) for the value of these services. The expense is deductible in calculating corporate income tax. The company will only be able to deduct VAT if the activity is organized with the purpose of improving employees' skills; otherwise, VAT cannot be deducted.
 
  1. In the case of a mixed-purpose team building event, which includes both training and recreational activities, a clear distinction will be made between the training part and the recreational part, and separate tax treatments will be applied, as described above.
 
The necessary documents must meet the conditions specified in Order No. 2634/2015 issued by the Ministry of Finance in order to be considered justifiable, meaning they should contain clear information regarding both the document issuer and the beneficiaries.
 
It is recommended that provisions regarding team building activities be included in the internal regulations of the organizing company and/or in internal decisions that establish the organization's guidelines (duration, meal reimbursement conditions, number and list of participants, purpose of the activities, etc.).