A company organised a team building: a weekend at a hotel, dinner and activities for all employees. The aim was clear — motivation, a better team, better service to clients. Before booking the cost, it wrote to the Public Revenue Office (UJP): is the cost deductible, and does personal income tax have to be calculated for the employees?
UJP's answer (opinion of 5 October 2023): it is other income of the employees, and the company calculates and pays personal income tax on it.
Why it is income when nobody received money
The Law on Personal Income Tax does not require income to be in cash. Income earned "in money, in securities, in kind or in any other form" is taxed (Article 3(2)). Accommodation, food and entertainment paid by the company are income in kind.
A team building is not salary, rent or any of the other ten types of income. So it is other income — any income that does not fall into the other categories and is not exempt under Article 12 (Article 71(1)). Article 12, which lists the tax-free allowances, does not mention team building.
How much the tax is
The rate is 10% (Article 11), and the base is the gross income (Article 73). The employees did not receive any money from which the tax could be deducted, so the company pays the tax — and it does so on the gross amount. What the employee received is net; the gross is the net divided by 0.9.
| Example: 12 employees, team building MKD 60,000 | Per employee | Total |
|---|---|---|
| Cost (net income) | MKD 5,000 | MKD 60,000 |
| Gross income (net ÷ 0.9) | MKD 5,556 | MKD 66,667 |
| Tax at 10% of gross | MKD 556 | MKD 6,667 |
In other words, for every MKD 100 spent on team building, about MKD 11 is tax.
The rule: the team building cost is split per participant, and for each participant the company files an e-PDD return and pays the tax before the payment — not at year end.
How it is reported
The tax is paid by withholding: the payer calculates, withholds and pays it with each payment (Article 80(1)(9)). The calculation is made for each employee separately (Article 84) and submitted to UJP before the payment (Article 85).
According to UJP, the income is reported in the e-PDD as type T11 — Other income, subtype S11.2, with the payment method "payment in another form".
For this you need a list of participants and the amount per participant. Anyone who did not attend has no income.
When it is not team building
Training is a different matter. The law exempts the cost of training and further qualification related to the employee's job (certificates, licences and the like), provided the employees keep working for the same employer for a period set by contract (Article 12, point 46). A sales skills workshop with a commitment to stay is training. A bonding weekend is not — whatever the invoice calls it.
What to check in your company
Team buildings, New Year parties with staff, outings and gifts paid this year: is there a list of participants, and was an e-PDD return filed? If not, the tax can still be calculated now — with late-payment interest. Better now than during a tax audit.