Tax Benefits of Corporate Benefits: How Employee Benefits Pay Off for the Company
Employee benefits primarily benefit employees. However, they are also advantageous for employers. Companies benefit not only from increased employee retention but also from tax advantages associated with corporate benefits. Here, we will show you which benefits bring these advantages.
Key Information on Tax Benefits of Corporate Benefits at a Glance
- There are various corporate benefits that bring tax advantages to companies.
- These employee benefits (monetary and non-monetary) usually fall under specific allowances, up to which the benefits are tax and duty-free.
- These include, for example, non-cash benefits up to 50 euros per month and subsidies for health offers.
What Does the Term "Cash Benefit" Mean in This Context?
The term "cash benefit" refers to all non-monetary services that an employee receives from the employer and which have a monetary value. In the context of salary conversion and wage cost optimization, the cash benefit can include the private use of a company car or the free provision of IT equipment.
However, legal allowances and lump sums make it possible for certain cash benefits to remain tax-free up to a certain amount. We will show you the tax treatment of corporate benefits that fall into this category.
These 12 Corporate Benefits Offer Tax Advantages
There are a number of corporate benefits that offer tax advantages to employers. These include the following options, which are common in many companies:
- Various non-cash benefits up to 50 euros per month, such as vouchers
- Job bikes and company cars
- Meal vouchers and consumption vouchers
- Travel allowances and job tickets
- Internet usage and IT equipment, both private and professional
- Non-cash benefits and employee gifts
- Health offers
- Employee discounts on goods and services
- Childcare and kindergarten subsidies (care costs)
- Occupational pension schemes
- Stocks
- Inflation compensation bonus
We will explain the tax treatment of each corporate benefit in detail in the following sections – including allowable amounts, restrictions, and the legal basis in Germany. The data is current as of March 2024.
Non-Cash Benefits up to 50 Euros per Month
As an employer, you can provide your employees with non-cash benefits worth up to 50 euros per month, tax and social security-free. These include, for example:
- Rechargeable value and voucher cards
- Fuel cards and fuel vouchers
- Public transport tickets
- Other vouchers
The regulation is based on the Wage Tax Directive R 19.6 Abs. 1 LStR. Vouchers, products, or services that cannot be converted into money fall under this category.
Job Bikes and Company Cars
Employers are free to provide their employees with bicycles or e-bikes for professional and private use. These are tax and social security-free if offered in addition to the salary.
Important for employees: The cash benefit from the private use of a company car must be taxed, with a reduced assessment basis for electric cars: instead of one percent of the list price, only 0.25 percent for private use.
These regulations are governed by § 3 Nr. 37 EStG and § 8 Abs. 2 Satz 2 EStG.
Meal Vouchers and Consumption Vouchers
Consumption vouchers and meal subsidies provided to your employees at the workplace are tax and duty-free as long as they are consumed at the workplace.
Travel Allowances and Job Tickets
Job tickets are tax-free according to § 3 Nr. 15 EStG, as long as they are provided under the conditions of public transport. Travel allowances can be tax-favored under certain conditions, especially if a flat-rate tax of 15 percent is chosen. This regulation can be found in § 40 Abs. 2 Satz 2 EStG.
As an employer, you can thus support the travel costs of your employees to the workplace in a tax-favored manner.
Internet Usage and IT Equipment
The cost of private internet usage up to 600 euros annually and the provision of IT equipment (mobile phones, tablets, notebooks) for private use are tax-free for your employees as long as you remain the owner or lessee of the equipment.
The wage tax treatment of providing IT and telecommunications equipment is governed by R 19.5 LStR.
Non-Cash Benefits and Employee Gifts
Gifts for personal occasions such as an employee's birthday or wedding are tax and duty-free up to a value of 60 euros.
This regulation is subject to § 37b EStG, which governs the flat-rate taxation of non-cash benefits.
Health Offers
You can provide your employees with health promotion measures up to an amount of 600 euros per year tax and social security-free.
This includes offers such as company health courses, preventive measures, or subsidies for fitness studio memberships. The basis for this possibility is § 3 Nr. 34 EStG, which specifically concerns the promotion of employees' health in the workplace.
Employee Discounts on Goods and Services
Employers can grant their employees tax-free discounts on their own products or services. However, two rules apply:
- The price discount must not exceed four percent.
- The price paid by the employee must be at least 96 percent of the usual retail price.
Discounts beyond this are tax-free up to an allowance of 1,080 euros per year. The tax regulation is provided by § 8 Abs. 3 EStG.
Childcare and Kindergarten Subsidies (Care Costs)
The assumption or subsidy of care costs for non-school-age children is tax and social security-free for employees. This also includes subsidies for kindergarten or daycare costs. This regulation is based on § 3 Nr. 33 EStG.
Occupational Pension Schemes
If you want to support your employees for their time after the job through occupational pension schemes (bAV), there are certain limits.
According to current legislation, contributions up to eight percent of the contribution assessment ceiling in the pension insurance can be paid tax-free. This possibility is governed by § 3 Nr. 63 EStG.
Stocks
The last corporate benefit that brings tax advantages benefits the fewest companies. If employees are involved in a company, for example through stock options or employee shares at preferential conditions, this can be tax-favored under certain conditions.
Since 2022, the allowance of 1,440 euros for employee capital participation, which remains tax-free annually, has applied. The exact tax treatment depends on the specific design of the participation program and is governed by various paragraphs of the Income Tax Act (EStG).
Inflation Compensation Bonus
A special feature is the inflation compensation bonus decided by the federal government – it is time-limited. The tax and social security-free bonus may amount to up to 3,000 euros and can be paid out until December 31, 2024.
Other Employee Benefits That Are Tax-Free Employer Contributions
The twelve corporate benefits presented are not all tax-free employer contributions that you can grant employees. Other options in brief:
- Moving cost allowances are tax-free if the move is professionally induced.
- Costs for professional training and further education.
- Recreation allowances can be granted tax and social security-free once a year under certain conditions.
- Travel expenses incurred during official duties.
- Company events and excursions, as long as certain conditions and allowances are met.
- Providing employee housing can be tax-favored under certain conditions.
- Employer loans at favorable conditions, as long as the loan amount does not exceed 2,600 euros.
If you are generally wondering what the most popular and best corporate benefits are in 2024, we recommend our detailed article on this topic.
Conclusion: Tax-Free Employee Benefits Are Worthwhile for Both Sides
Tax-free employee benefits are not only an incentive for employees – as an employer, you benefit from the tax advantages of these corporate benefits.
You thus express your appreciation and strengthen employee retention with monetary and non-monetary incentives without increasing ancillary wage costs. By using these tax-favored benefits, a win-win situation is created for both sides.
