Individual Employee Tax A Huge Challenge For Incentive Travellers

1st March 2013

“It’s a perks tax and a huge issue for us and the incentive market in those countries. Besides the European recession this is the other challenge we’re up against,” says Robin McLeod, SA Chapter Committee Member, Society of Incentive and Travel Executives (Site).

The fringe benefit tax liability of incentive programmes varies from country to country, with developed nations such as Germany having taxed incentive trips for more than a decade, explains Daryl Keywood, MD, Walthers DMC. “Most reputable companies do declare incentive trips as a taxable benefit for their employees. The trip’s cost is added to employees’ salaries for tax purposes and in many cases their salaries need to be grossed up even further so they don’t end up taking home less than they would if they hadn’t qualified for the trip. So the company doesn’t only need to fund the trip’s cost, but also the additional tax cost for the employee.”

Keywood says one way of minimising this additional tax impact is for incentive programmes to include a work, training, CSR or educational element which doesn’t carry any taxable liability for the employee or company. Many programmes now do this as a result.

Individual employee tax for incentive travellers, which not only applies to travel costs but also gifts, is a very strict policy, adds McLeod. It’s been in effect for a while and, despite discussions to have it lifted, he doubts whether it will change soon.

Marije Breuker, former Site President: The Netherlands and Owner, Motivational Travel, says although Site International spearheaded an earlier fight by the hospitality industry against this tax, Site is a voluntary organisation and not in a position to negotiate with governments. “This fight needs full diplomatic power.”