Tax-free benefits in kind 2022: possibilities and advantages

“Small gifts preserve friendship” goes the old saying. But not only friendship, but also a good working relationship. Gifts in kind are a nice gesture to show employees how important they are to the company.

In contrast to an increase in salary, they are also tax-free. However, there is an exemption limit that must be observed to ensure that the so-called benefits in kind do not result in any social security contributions.

What exactly is a tax-free benefit in kind?

A non-cash benefit is a benefit in kind that an employer can give to employees as a thank you for good performance, as motivation or as a token of appreciation. Unlike a salary increase or a cash benefit that is transferred to an account, a non-cash benefit is a non-cash benefit for which neither income tax nor social security contributions have to be paid.

This means that employees can enjoy the full value of the non-cash remuneration – provided it complies with the current non-cash remuneration exemption limit and has no business benefit.

What exemption limits apply to tax-free benefits in kind from 2022?

Until the end of last year, the non-cash benefit exemption limit was 44 euros per month and per employee. On January 1, 2022, it was raised by 6 euros by a legislative decision of the Federal Fiscal Court and now amounts to 50 euros per month. As soon as the exemption limit is exceeded – even if only by one cent – the benefit in kind becomes taxable.

In addition to the 50-euro non-cash benefit exemption limit, a company has the option of providing employees with an event-related non-cash benefit free of tax. The exemption limit here is 60 euros per gift or voucher. A personal occasion is, for example, a birthday, wedding, the birth of a child or an anniversary.

If a person has several of these occasions in one and the same month, the employer can use a corresponding number of benefits in kind in compliance with the maximum amount and also combine them with the 50-euro benefit in kind.

What types of tax-free benefits in kind are there?

Over the years, the regulations have become much stricter. As already mentioned, the benefit in kind must not have a direct business benefit and not all discount and non-cash benefit cards, universal vouchers, cash benefits and asset participations fall under this definition.

Cash cards and vouchers may only be used to purchase goods or services from authorized points of acceptance so that they are recognized as tax-free benefits in kind.

So what exactly still counts as benefits in kind since the new law was passed? Vouchers for eBay or Amazon no longer. However, a gift, such as a concert ticket, a voucher for a specific store or a credit for a petrol station, can be a tax-free benefit in kind.

Another option is an invitation to a meal or other company event. Monetary benefits such as subsidies for childcare or health services, such as fitness courses, are also included.
A meal allowance is also possible as long as employees continue to pay at least the value of their lunch themselves. This is currently EUR 3.57 per meal.

What advantages do employees have from tax-free benefits in kind?

The benefits of tax-free benefits in kind for employees are obvious: they receive a bonus in addition to their salary. This is not a cash benefit, but an earmarked benefit in kind. The advantage: no tax is payable up to a certain exemption limit.

This would be different for a financial benefit that is transferred to the account together with the salary. It could not simply be accepted without paying social security contributions and income tax.

This is different for small gifts and presents in the form of vouchers and discounts: One hundred percent of their non-cash benefit value goes to the employee and feels like a salary increase. After all, this can result in benefits in kind worth a total of 600 euros per year.

What advantages do employers have from tax-free benefits in kind in 2022?

As already mentioned at the beginning: Small gifts such as fuel vouchers or non-cash benefit cards are an easy way to show employees appreciation and gratitude. You can achieve a great deal with little effort, as non-cash benefits in addition to wages increase employee motivation and retain them at your company.

The tax-free non-cash benefit is also a good alternative to a salary increase and gives you more leeway in staff appraisals. Another important point for employers: benefits in kind can be deducted by the tax consultant as business expenses.

What do employers need to consider when using benefits in kind?

The legal exemption limit of 50 euros per month for remuneration in kind applies to each individual employee. If this sum is not exhausted, it is forfeited, as outstanding amounts cannot be transferred. While salary conversion was still possible before 2020, non-cash benefits can now only be paid in addition to wages, according to the Federal Fiscal Court’s legal ruling.

As soon as the permitted 50 euros is exceeded, you as an employer must pay income tax and social security contributions on the entire amount. There is also a documentation requirement for the issue of benefits in kind. If the tax office asks, you should always be able to prove when, for whom and in what form benefits in kind were provided. Therefore, always keep invoices and copies of discount and voucher cards.

Teamhero as support for personnel management

Teamhero software comes into play whenever personnel planning is required, including the creation of duty rosters, the recording of working hours and the management of salary extras. It enables companies to manage their permanent and freelance employees in a time-saving and cost-efficient manner and always keep an eye on everything. The program can be adapted to individual needs, making it a tailor-made solution.

Whether recruiting new colleagues, archiving relevant documents for the personnel file or quality management, Teamhero impresses with its many useful functions and makes everyday work noticeably easier – naturally in compliance with data protection and legal requirements.

Our conclusion on tax-free benefits in kind

Unlike cash payments and cash benefits, fuel and goods vouchers are tax-free salary extras. Since the beginning of 2022, employers have even had more financial leeway when guaranteeing benefits in kind, as the exemption limit has increased from 44 euros to 50 euros. At the same time, however, the number of acceptance points has been restricted. Only benefits in kind that meet the criteria of the Payment Services Supervision Act (ZAG) are now permitted.

Nevertheless, the awarding of vouchers and cash cards opens up numerous opportunities to give employees a little extra to reward their previous efforts or motivate them for upcoming tasks.