Benefits in Kind
Subsidizing food is just one way to get on the good side of employees, while saving on taxes. We'll show you options for non-wage benefits and what to pay attention to.
Additional benefits are becoming more and more important to make businesses stand out, raise work morale and employee retention. Making use of benefits in kind is the easiest way to give employees additional boni while still keeping the costs and expenses at a minimum. Supported by the German government, these non-monetary remunerations (amtliche Sachbezüge) include free accomodation, meals and certain goods and services. Additionally, small gifts can be added on top!
Surely, a raise seems more worthwhile than goods and services. Who doesn't like a larger number on their paycheck rather than saving a little here and there?
Fact is, raises always also mean higher taxes.
Official benefits in kind are not linked to any occasion but rather are considered a continuous remuneration granted to employees. What the advantage? Monthly, remunerations can be added to the usual salary without additional wage or social tax deduction. This saves both the company and the employees money!
For this to apply, the benefit sum must be below the tax exemption limit of 44 EUR per employee and month, as written in the 8 Abs. EStG.
Good news - in 2022 the limit is raised to 50 EUR!
There are a different forms that the non-wage remunerations can be granted, as long as the worth stays within the tax exemption limit. The German tax office (Bundesfinanzamt) officially permits the following form of benefits: coupons for local businesses, coupons for a network of service providers and gas station coupons. The later can only be used for vehicle-related services, not for any other goods provided at a gas station.
An advantage of benefits is that any sum above the exemption limit may not be fully taxed as employers can choose to pay a lump-tax at 25% rate. Companies save on social tax as a result.
Example: The employer gives her employee a book shop voucher of 80 EUR. 44 EUR are tax exempt, while the remaining 36 EUR can be taxed at 25%.
Another way to make presents tax-free is to ask employees to pay any excess amount from their own pocket.
For tax-free benefits, Germany has two distinct categories: non-cash remuneration and small gifts (Aufmerksamkeiten). Up to 60 EUR (2021) can be spent on small personal gifts to employees. This way, employers can congratulate a team member to a special occasion like a birthday or a wedding without additional tax deductions.
1. Presents have to be a personal gesture to an employee
Meaning, gifts can't be given on a national holiday which all employees can celebrate equally like Christmas, Easter or similar public holidays.
2. Only materials count as gifts
Cash can never be a tax-free gift! But any material is fair game, so anything from flowers, books, wines etc. goes!
3. The tax-free sum of 60 EUR should not be exceeded
Even if it's just a single cent more than that, the entire sum has to be taxed. Otherwise, companies may also pay a lump-tax of 25%
The 44 EUR tax exemption limit does not apply to all non-cash remunerations or presents. In addition, employees can subsidize even more things to make employees happy.
With the food subsidy 6.57 EUR a day, translating into more than 1000 EUR a month can be subsidized for each employee. And this is on top of the benefits in kind tax exemption limit!
From 18.12.2020 the German tax ministry (Bundesfinanzministerium) has declared 'Open loop prepaid cards' such as Mastercard, Visa or Maestro as no longer tax exempt benefits. This is because they have no restrictions on which products they are used on, which makes purchases less transparent.
As a result of the Corona crisis, the economy has taken a big hit from 2020 on. Particularly the gastronomy, health and retail sectors have struggled. To ease some of the burden, employers can give their employees a bonus of 1.500 EUR each as a reward for the work during this crisis. This amount is wage and social tax free and can be granted between 1. March 2020 to 31 March 2022 after the deadline was extended. Similarly, any additional payment up to 80% to the general short-time allowance (Kurzarbeitergeld) will also be free of social and wage taxes. All sectors can benefit from the corona bonus!