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Tax-free in-kind benefits for employees – this is how it works!

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What are benefits in kind?

Non-monetary benefits are income that is not cash, such as goods and services that you as an employer offer your employees as fringe benefits. In principle, these so-called benefits are initially regarded as your employee income, i.e. assets that exist in cash or monetary value within the meaning of § 8 EStG.

The value of this benefit is therefore included in the taxable remuneration of the employee. However: Up to an exemption limit of 44 euros per month and from 2022 up to 50 euros per month However, the benefit in kind is not included in the remuneration.

Tax breaks and tax-free benefits in kind: the difference

A benefit in kind is above all a benefit that is not paid directly in euros and cents, but in the form of a benefit in kind. A distinction is made between only tax-advantaged benefits in kind and totally tax-exempt, so-called, benefits in kind tax-free benefits in kind.

The company car, for example, is one of the benefits in kind with a tax advantage. In any case, it is necessary to add the non-monetary benefits in accounting to the remuneration as a benefit in kind. According to the Income Tax Act § 8 ​​Para.2 Clause 11 EstG, you can currently pay your employees up to €528 more per year, and from 2022 even up to €600 per year – and that without taxes and social security contributions.

But be careful: just one penny more means that the whole amount is subject to tax!

No money, just benefits in kind

The regulation on non-monetary benefits was specified in more detail in 2020 (Art. 8 (1) sentence 2 EStG) and now describes the type of benefit much more precisely: “Cash income also includes set aside cash benefits , subsequent reimbursements of expenses, cash subrogations and other benefits based on a monetary amount are”. This means that every transfer of money to the employee is taxable. Subsequent reimbursements of expenses such as cash remuneration are also taxable starting from the first euro This distinction is especially important if you want to give your employees an edge, because how you do it matters so much.

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Getting tax-free benefits in kind well: example of a company bicycle

Already a classic plus: mobilize your employees with a company bike, e-bike or pedelec. The employment contract therefore contains the right to a bicycle as a benefit. But it all depends on how you organize the handover.

Here's how it's wrong:

Instead of the bicycle owed, you pay your employee an amount of 800 euros for the purchase of the bicycle. Even if you define it in the employment contract with the purpose of the advantage – in terms of tax law, this does not imply the assumption of an advantage in kind. Rather, it is a cash payment for a specific purpose. If the employee goes out and buys a bicycle and you pay the purchase price after presenting his proof of purchase, this is a subsequent reimbursement of costs, not a benefit in kind.

Here's how to do it right:

Indeed you must buy the bicycle as an employer and then hand it to the employee. Incidentally, the same applies to allocated fuel subsidies or subsequently reimbursed fuel costs. Also affected: vouchers created by you as an employer, which also count towards subsequent expense reimbursement.

By the way: you can find out how to sell a bicycle for yourself in our specialized article Deduct bicycles from taxes – E-Bike, Pedelec and Co. for the self-employed.

Are vouchers tax free as benefits in kind?

The vouchers that employers give to their employees are especially popular. After all, every individual gets a lot of freedom when and how he can and wants to use it. But Attention, here the legislator has issued many new and stricter regulations. Because with the wording of § 8 para. 1 sentence 2 EStG allocated cash benefits, subsequent reimbursements of costs, cash substitutes such as credit and prepaid cards and other benefits that are based on a monetary amount are not benefits in kind. However, a voucher has a clear euro/cent value and is therefore excluded from the permissible benefits in kind.

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But there is one exception:

Sentence 3 of the law defines an exception for vouchers and voucher cards, which only entitle you to purchase goods and services.

So called closed circuit cardsor rechargeable gift cards for some shops and points of acceptance, as well as so-called Controlled circuit boards, i.e. shopping mall vouchers and city cards that can only be redeemed in certain shops, are still possible. Provided they are not considered payment services and do not have a cash payment function. In case of exchange of goods it is not possible to make cash payments.

Like you this use a tax-free benefit-in-kind with a card you can find out here.

Examples of tax-free benefits in kind

There are many ways your Provide employees with tax-free benefits in kind. Here is an overview of a selection:

50 Euro gift voucher Merchandise vouchers and ATM cards within the exemption limit
Tax Free Gifts Tax-free gifts in kind for personal occasions up to 60 euros
health promotion

Health promotion to reduce the risk of disease and promote health up to €600 per year

mobile devices Supply of mobile terminals such as company cell phones, tablets or computers
meal allowance

Subsidy for meals, for example via a canteen, restaurant vouchers or a digital meal voucher

job ticket The use of local public transport is completely tax-free
railway card Bahncard also for private use, but the savings must be higher than the costs of the Bahncard
asylum allowance The care of under-school children in kindergartens, etc. it is completely tax free
Corporate health insurance company health insurance with monthly contributions of a maximum of 50 euros

Staff discount allowance

Apart from other offers for your employees, there is the so-called for self-produced or sold goods or services Staff discount allowance. This amounts to EUR 1,080 per year (Section 8 (3) EStG). Until then, neither income tax nor social security will be due.

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Corona bonus: tax free

In the course of the corona crisis, the Federal Ministry of Finance has offered employers the opportunity to compensate employees for the increased effort and stress pay tax-free bonuses. Up to 1,500 euros you can disburse to an employee in the period from 1 March 2020 to 31 March 2022 exempt from taxes and social security contributions.

Further instructions on the topic “… the right way to deduct taxes”:

Keeping an Electronic Record: An Overview of Registry Tools and Apps (2021)

Company car: Deduct the car expenses

Deducting travel expenses from taxes: which is more convenient: taxi, company car or limousine service?

Correctly deduct travel expenses and business trips

Deduct your study (home office) from your taxes

Disclaimer

This text is an overview of the possible non-monetary benefits from a tax point of view. This does not amount to tax advice and we expressly point out that editorial errors or outdated specifications cannot be excluded.

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