At the beginning of the millennium, the carnival revellers were still having a good laugh: The Cologne Fiscal Court was still certain that a costume party at carnival was enough of a tradition to qualify for tax privileges.

Although, it can't have been quite so sure, after all it allowed the appeal.

But first to the case: A carnival club recognized as a non-profit organization hosted a large costume party during carnival week. Among others, the cheerleaders of 1. FC Köln and a pop singer performed.

As the party promotes carnival customs, it serves the purpose of the association as a "special-purpose business". Consequently, the profits from the event are exempt from corporation tax and only the reduced tax rate of 7 % is payable on sales.

The judges at the Federal Fiscal Court, on the other hand, couldn't take a joke and ruled:

The event is to be classified as an "economic business operation" and only serves commercial purposes. A carnival party only qualifies for tax benefits if it has a traditional character. The guests' costumes and musical or dance performances alone are not enough for it to be considered a carnival meeting. Then the fun was over.

👉 Whether it's an event, party or other topics - we at WSB will be happy to assist you with your tax questions and concerns:
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