Die Welt newspaper reported on Sunday that the Hamburg-Mannheimer insurance firm considered the hefty sum fully tax deductible.
Ergo, the insurer's parent company, told the paper the orgy had been considered a “normal event” for which the costs were marked as regular operating expenses.
“The bill has been treated entirely as a business expense,” said an Ergo spokesman.
“According to our assessment, this was in full accordance with tax law," he added. "But we continue to explore the possibility of a different conclusion, and how we can rectify the matter.”
Earlier this month, revelations surfaced that Hamburg-Mannheimer had sponsored a 2007 sex party for its top 100 employees at the historic Gellert thermal baths in Budapest, for which twenty prostitutes were in attendance.
Participants told the German media that the most attractive women were marked with white ribbons and reserved for the company's board members and top sales people.
According to Die Welt, it is common for German company executives to charge brothel visits as a business expense, and there are many ways to prevent details appearing on the bill.
Some prostitutes are paid as multilingual hostesses, according to tax inspectors, while hotels in some countries simply include sex services in the cost of a room.
“Look at the official prices in hotels, and compare them to what you actually pay," said an inspector at a regional tax office, speaking on the condition of anonymity.
"There is plenty of room for ‘special services' to be included in the cost of a room. We have way chance to prove this."
Receipts from the orgy in Budapest make no reference to specific services, the Ergo spokesman said.
“According to our records, there is no detailed evidence for the services of 20 prostitutes,” he told the paper.
The burden on the German taxpayer for the sex party in Budapest was lessened only slightly by the fact that each of the approximately 100 participants were forced to pay tax on €3,000 in benefits having cash value.
But in most cases, companies deduct most expenses on business trips, resulting in taxpayers footing the bill for their escapades.
Tax deductions for prostitution is not clearly defined in Germany, according to Die Welt, though most tax experts conclude that brothel services are not a valid write-off. This means that if a client requests that an event agency exclude incriminating itemizations from invoice, it would qualify as tax fraud.
The sex party in Budapest was reportedly organized by the event agency EMEC, based in the Bavarian city of Türkheim. But an EMEC executive, Robert Ackerman, refused to take responsibility for the prostitutes.
“We had nothing to do with the prostitutes at the Gellert spa,“ Ackerman told Die Welt.