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In addition to a monthly salary in the form of a cash payment, employers and employees may agree on further benefits. The additional remuneration is provided by the employer in the form of services or tangible goods. In legislation, these benefits are referred to as "non-cash benefits". The receipt of any cash must hereby be excluded. Non-cash benefits can apply to all employees of a company including part-time employees, trainees, and mini-jobbers. Depending on the type of taxation, non-cash benefits can constitute a so-called "benefit in kind" for the employee that is considered a form of income and therefore subject to tax and social security contributions.

What is a benefit in kind?

The benefit (in kind) is a non-cash benefit that employers may offer to employees in addition to their salary.

These benefits may include, for example:

• Discounts
• Company car
• Private use of IT equipment
• Free lunch in the canteen

The benefit in kind is defined as the amount that the employee would invest in the non-cash benefit, if they were to buy it themselves.

Pursuant § 8 of the Income Tax Act (Einkommenssteuergesetz [EstG]), the non-cash benefit that is associated with receiving a benefit in kind is always considered income and therefore subject to tax and social security contributions. In payroll, the calculated amount of the benefit in kind is added to the employee's gross salary and is then subject to income and social security tax. It is then deducted again from the net amount, as it is only there as part of the tax and contribution calculations.

Non-cash benefits and benefit in kind in payroll accounting

Benefit in kind can be a challenge in payroll accounting. To calculate it correctly, the following points have to be considered:

• Non-cash benefits up to a monthly value of €50.00 are not subject to tax or social security contributions.

  Note
  Tax-free non-cash benefits for employees must appear on the payslip, even if they are within the €50.00 tax-free threshold. The amount and date of the benefit paid must be recorded in writing.

• The benefit in kind for the company car is based on the
  1% rule or on the logbook. 
  
  
• With staff discounts, up to 4% of the discount up to a maximum of €1,080.00 per year is tax-free.
  
  
• The cash method principle applies. It must be possible to prove when the non-cash benefit was paid and booked in the month in which the employee actually received it.

Non-cash benefits and benefit in kind, their tax-free amounts and thresholds

Every benefit in kind has an allowance or tax exemption limit. The amount varies depending on the type of benefit.

Note
▶︎ Allowance: In the case of an allowance, only the amount that exceeds the set allowance is subject to tax.
▶︎ Tax exemption limit: If the tax-exemption limit is exceeded, the entire amount becomes taxable.

• Non-cash benefits up to €50.00
  Non-cash benefits up to a value of €50.00 are tax-free. These include, among other things:
  ▶︎ Meals outside of business trips
  ▶︎ Fuel vouchers
  ▶︎ Gym subsidies
  ▶︎ "Job tickets" for local public transport
  ▶︎ Product vouchers
  
  
• Company car 
  There are several aspects to keep in mind when calculating the benefit in kind of a company car. For further information and examples, see our article about company cars. 
  
  
• Bonus miles
  Employees who frequently travel for work and collect bonus miles can use them privately up to an annual allowance of €1,080.00. However, the employer can insist that the miles be used for business purposes.
  
  
• Company apartment
  Further allowances include cost savings when using a company apartment. The allowance is currently €278.00 per month (as of 2024).
  
  
• Health-promoting measures
  Employers can support their employees' health by offering preventive measures such as regular massages or physiotherapy. This non-cash benefit is tax and social security-free up to an annual allowance of €600.00.
  
  
• Emergency childcare
  For childcare in emergency situations, where the usual care for a child or children can't be provided (only aporlie fro children under the age of 14), the employer can refund up to €600.00 annually to employees tax- and social security-free. This is the so-called childcare allowance according to § 45b of the Income Tax Act (EStG).
  

  Example
  The allowance can, for example, be used to look after sick children, when kindergartens or schools close temporarily, or in other unforeseen situations in which care is needed but the regular care option is not available.

• Staff discounts
  A staff discount is a price reduction or concession that employers grant their employees in order to offer them special terms when purchasing goods or services. A distinction is made between the following scenarios:
  
  
  Own company discounts

  Example

  An employee of an exclusive kitchen store purchases a large kitchen for herself that has a regular price tag of €13,000.00. The staff discount is 10%. The employee receives thus a benefit in kind of €1,300.00. This amount, however, exceeds the annual tax-free allowance of €1,080.00. Therefore, the difference between €1,080.00 and €1,300.00 is taxed as a taxable benefit in kind.

  Note
  The allowance for staff discounts is €1,080.00. If the final amount is higher than the tax-free allowance despite the staff discount, it is a taxable benefit in kind.

  Discounts from third-party companies

  Example
  An enterprise group's marketing department is active for all affiliated individual companies. This means that employees of the marketing department provide a service for the other companies. If these companies now grant staff discounts, this constitutes a form of consideration. The normal discount becomes a benefit in kind, with the amount above the allowance of €1,080.00 being subject to tax.

  Note
  In the case of discounts from third-party companies, it should be verified that the employees are not doing work for the other company as part of the employment relationship.

  
  

When is a benefit in kind tax-free?

A benefit in kind is tax-free if the non-cash benefit primarily serves the interests of the company. 

Meal vouchers or food stamps

Many companies issue meal vouchers or offer heavily discounted lunch options in their own canteen. For these non-cash benefits, values have been defined for taxation purposes. For example, the non-cash benefit value of a lunch or dinner is maximum €4.13 and for a breakfast €2.17 (as of 2024). An employer who issues food stamps or meal vouchers to employees may subsidize the official non-cash benefit value by a maximum of €3.10. This means the value of the voucher must not exceed €7.23.

Although this is a benefit in kind, the €3.10 are tax-free for the employee. The difference of €4.13 is subject to regular taxation. However, employers can choose a flat-rate taxation of the non-cash benefit values of 25%. 

Tip
If a company provides fruit, mineral water, fruit juices, or coffee free of charge, this is not a benefit in kind.

Childcare

If the company covers unlimited costs of childcare in addition to the salary, this is a benefit in kind that is exempt from tax and social security contributions.

Business/office hardware

If a company allows the private use of business hardware such as a laptop, company cell phone, or tablet while the hardware remains the property of the company, this benefit is also tax-free. In case of gifting, a 25% flat-rate tax would have to be borne by the employer.