Tax-free benefits in kind 2023: The special thank you!

Expressing appreciation for your employees is not just about words of gratitude and money. How about a benefit in kind, for example?
The advantage: when an amount is “paid out” via vouchers or cash cards, this is tax-free up to a certain limit. As the maximum tax-free allowance and the options for using it can change over time, it makes sense to check the current conditions every year. For example, the maximum limit for tax-free benefits in kind in 2023 has risen by six euros from 44 to 50 euros in 2022 – making a total of 600 euros per year.

What is a tax-free benefit in kind?

If you want to reward your employees for their loyalty and retain their loyalty to the company, tax-free non-cash benefits are an attractive alternative to a pay rise. More money is nice, but as the remuneration has to be taxed, usually only half of it ends up in the account. This is not the case with tax-free benefits in kind. As the name suggests, this is a benefit for which no taxes or social security contributions are due.
Benefits in kind are given to employees in the form of universal vouchers, cash cards or discounts instead of being paid out in cash. If you as an employer want to use the “Salary Extra”, you must note that there are legally defined options for use as well as an exemption limit for benefits in kind.

Tax-free benefits in kind 2023: What will change compared to the previous year?

The Income Tax Act (EStG) regulates the conditions and requirements for tax-free benefits in kind in detail. And laws change or are amended from time to time. However, there is not much new to report with regard to tax-free benefits in kind in 2023: After the non-cash benefit exemption limit rose from €44 to €50 per month last year, the amount has not been increased any further this year. Salary extras that do not involve additional wages in the bank account remain tax and social security exempt up to a maximum value of 50 euros. It is still the case that not only full-time employees can benefit from tax-free benefits in kind, but also mini-jobbers, trainees and employees who work part-time.

Other conditions and requirements under which benefits in kind can be granted tax-free include

– Employees receive the benefits in kind in addition to their monthly salary.
– Cash payment of goods vouchers is not permitted.
– The monthly non-cash benefit exemption limit of 50 euros is not exceeded.
– The regulations of the Payment Services Supervision Act (ZAG) apply to non-cash benefit cards and vouchers.
– Tax-free non-cash benefits are granted monthly and may not be accumulated or taken into the next month.
– The amount of the non-cash benefit and the date on which the employee received it must be documented.

What are the ZAG regulations?

The Payment Services Supervision Act – ZAG for short – divides vouchers and cash cards as non-cash benefits into the following three categories:

Vouchers and cash cards for certain social or tax purposes: non-cash benefit cards for medical services or company health benefits, meal cards in a social institution, meal allowances, etc.

Vouchers and cash cards for a limited range of products: non-cash benefit cards that are limited to specific product groups, e.g. public transport, gym, petrol station, press, streaming service, skin care treatments, clothing, etc.

Vouchers and cash cards for limited points of acceptance: Non-cash cards for a specific online retailer, retailer or petrol station operator as well as regional city cards, loyalty cards, etc.

What is the difference between a non-cash benefit and a cash benefit?

There are many ways in which a tax-free benefit in kind can be provided. However, care must be taken not only with regard to the exemption limit. Some offers initially sound as if they are tax- and social security-free extras, but they are actually cash benefits.
This primarily includes cash and credit cards used for daily payment transactions. Also excluded are payments made by the employer when taking out insurance, earmarked cash benefits and subsequently submitted cost reimbursements.

Prepaid cash cards as well as vouchers and cash cards that have a payout function or their own IBAN, can be deposited as a payment instrument or used for transfers also fall into the category of cash benefits and are therefore taxable.

Specific examples of tax-free benefits in kind in 2023

Now that it is clear what a tax-free non-cash benefit is and what you need to pay attention to with this type of “wage increase”, we would like to give you a few specific options for so-called non-cash wages:

– Vouchers, for example shopping and fuel vouchers
– Vouchers in kind for a specific region or a single acceptance partner
– Newspaper or magazine subscriptions
– Subsidies for health services, such as gym membership
– Gifts in kind and gift boxes
– Tickets for sporting and music events
– Restaurant vouchers

Does the 49-euro ticket count as a tax-free benefit in kind in 2023?

Allowances for the use of local public transport or a job ticket are also tax-free benefits that you can use to supplement your employees’ salaries without incurring social security contributions. This includes private and business trips by bus or train for which a receipt can be submitted. This option is in addition to the tax-free benefit in kind of 50 euros per month.

It is practical that the new Deutschlandticket falls exactly within the exemption limit for benefits in kind and can therefore be made available to employees. But it gets even better: the ticket can alternatively be deducted as a tax-free mobility allowance. This has the advantage that the 50-euro benefit in kind can be used for other salary extras and that companies can benefit from even greater tax savings and score double points with their employees.

Benefits in kind worth 60 euros for special occasions

If there is a special occasion, you can give your employees another treat in addition to the tax-free benefit in kind with the monthly tax-free limit of 50 euros – also with a benefit in kind. Such special occasions include, for example, a milestone birthday, an anniversary, the birth of a child or a wedding. However, there are not only private reasons to celebrate, but also work-related ones, such as a promotion, a new hire or retirement. However, Christmas does not count as either a private or work-related special occasion; Christmas bonuses are always subject to income tax.

The occasion-related gift in kind may not cost more than 60 euros gross and must be related to the recipient’s personal private or business event. A further requirement is that the gift is presented promptly. For example, a gift card is possible. But please note: Only rechargeable gift cards for certain stores and points of acceptance that only entitle the recipient to purchase goods and services are eligible. They may not have a cash function or offer the possibility of the equivalent value being paid out in cash when goods are exchanged. As soon as the benefit in kind exceeds the exemption limit of 60 euros by even one cent, tax is levied on the entire amount.

What changes will there be to non-cash benefits in 2023?

In connection with tax-free benefits in kind, we often hear about “benefits in kind values”. These are adopted annually by law after approval by the Federal Council on December 16, 2022 and are set out in the Social Security Remuneration Ordinance (SvEV). They describe benefits in kind that are subject to contributions, such as the provision of clothing, housing, heating, lighting, food or allowances. On January 1 of this year, some of the non-cash benefits values changed.

The development of consumer prices is decisive for the calculation of remuneration in kind. The 2023 remuneration in kind values are therefore based on the consumer price index from June 2021 to June 2022. There were changes to the monthly value for meals and the value of remuneration in kind for accommodation as at 1.1.2023:

Benefits in kind for meals 2023: The value has been increased to 288 euros and now amounts to 2.00 euros per calendar day for breakfast and 3.80 euros for lunch or dinner. This brings the total value for meals per calendar day to €9.60.

Non-cash benefit for accommodation 2023: The value for accommodation or rent is 265 euros per month or 8.83 euros per calendar day.

Conclusion on tax-free benefits in kind 2023

Show your employees appreciation and gratitude with small gifts and tokens of appreciation. And you should never skimp on either, even in times when there is no shortage of skilled workers. Among the many ways to do something good for your employees, gifts in kind are an attractive option – especially from a tax perspective. If all regulations are observed, you can grant each employee monthly vouchers for goods, subsidies for health services, voucher cards and other benefits in kind with a total value of up to 50 euros tax-free. You can combine as many benefits in kind as you like. The important thing is that all of them together do not exceed 50 euros. In addition, a further 60 euros is available for small gifts such as flowers, wine or a good book on a special occasion without having to pay tax or social security contributions. Many small gestures that create a win-win situation from which everyone involved emerges as a winner.

Further basic information on tax-free benefits in kind can also be found here.