Gifts Of Up To EUR 60 - What Should You Know?
Many employers express their appreciation for their team’s achievements through gifts, premiums or similar goodies. Here in Germany those gifts can even be tax-free, depending on how they are used and declared. But what should you consider to make sure you and your employees can benefit?
Which regulations are the base for this rule?
Tax-free gifts are an excellent way of doing your employees a favor. However, many companies fall into one of the many traps that come with them and end up facing a subsequent payment. In order to prevent this it is crucial to meet all the necessary rules.
Those rules were collected and noted by the German Federal Council in the “Lohnsteueränderungsrichtlinien” of 2015 (which translates as income tax change policies). But to get to the essence of them, you have a whole lot of reading to do - so we summarized the key points for you. First of all, here’s the bottom line: gifts of a value of up to EUR 60 are tax-free and non-contributory (as often as three times per year) - that’s what’s stated in the corresponding policies.
What things exactly are tax-free and non-contributory?
Non-cash benefits that are received as a gift for a certain personal occasion such as a wedding or the birth of a child are free of taxes or contributions. However, their worth must not exceed EUR 60. This fringe benefit may be used up to three times per year and employee.
- Only for non-cash benefits - not for monetary gifts
- A special personal situation must be given as an occasion
- The amount must not exceed EUR 60 / no more than 3 times per year and employee
Good to know: even meals can be tax-free and declared as part of these gifts if they are enjoyed under certain circumstances. That’s the case if offering a meal during a special job or meeting will actively improve the efficiency and thus benefit the company - for example, if you save time by allowing participants to eat while at a conference or training. If these circumstances are given, you may offer them the meal for free or for a reduced price and can declare the costs for it as part of your 60-euro-gift-allowance. (Again, only if the costs do not exceed 60 euros.)
What gifts are not part of this category?
It is important to keep in mind that these benefits only apply to non-cash benefits. No monetary gifts, even if they are below the 60-euro-mark, are tax-free, unless they are, for example, meal allowances - but that’s a whole different category.
Even if, as described above, certain extraordinary meals can be provided tax-free, this does not apply to daily lunches. Those can be subsidized e.g. through a meal allowance or fringe benefit.
What if you would like to make gifts more often?
As explained, gifts up to 60 euros are only tax-free three times a year. However, there is a loophole: these gifts can also be budgeted as part of a company event.
Twice a year, companies are allowed to spend up to EUR 110 per employee for an event. This could be a summer party or a Christmas do. Up to EUR 60 of this event can be budgeted for a gift, such as a nice bottle of champagne or a gift basket.
Is it possible to exceed the amount of EUR 60?
Of course you can also choose a gift of a higher value - but then you have to pay taxes for its entire price. This means that you don’t just pay taxes for the difference between EUR 60 and the actual price but for everything. So if you choose a gift worth EUR 70, you need to cover the taxes and social security payments for EUR 70. This is always the case, even if you exceed the maximum by merely a cent.
The Smunch Team