Tax-free Benefits for Employees 2025

From 2022, not only will the limits for tax-free benefits to employees change, but also the criteria under which employer benefits are considered non-cash benefits. Read our article today and learn all about the changes in non-cash benefits.

Tax-free benefits for employees 2025

From January 1, 2022 the threshold for tax-free employee benefits from forty-four to fifty euros per month will be raised. If there is an exceedance, the entire non-cash benefit of the month will be taxed, not just the amount that exceeded the limit. This regulation applies unless the non-cash benefit is exempt from tax under another provision. If the exemption limit is not fully utilized in a particular month, the remaining amount cannot be carried over to the next month .

No non-cash benefits in case of a refund or targeted payment

Since 2020 there have been more precise regulations regarding the tax treatment of monetary and non-cash benefits. In principle, all grants from the employer to the employee are subject to income tax, unless they are exempt from tax by special provisions. Non-taxable grants only exist if they are in the predominant business interest of the employer and therefore do not qualify as income. These include, for example, tokens of appreciation up to 60 euros gross on special occasions or the provision of beverages at the workplace.

For private events such as weddings, there are also opportunities to claim certain costs for tax purposes. Although the actual wedding costs are not directly deductible, under certain conditions, household-related services provided for the wedding celebration can be deducted from taxes.

Monetary benefits, subsequent reimbursements as well as cash substitutes are regularly taxable and do not qualify as non-cash benefits unless an exception according to § 3 EStG.

Tax-free benefits of the employer – vouchers and cash cards as non-cash benefits

Another important change in 2022 regarding tax-free benefits for employees concerns vouchers and cash cards. When we talk about vouchers, we mean voucher cards, digital vouchers as well as voucher codes and applications. On the other hand, cash cards include credit cards and prepaid cards. These will no longer be considered non-cash benefits unless they meet one of the three specific requirements.

• Option one – a limited group of collection points.
  ● Option two – receipt of a limited number of services or products.
  ● Option three – use of the card or voucher for specific purposes (tax, social).

Tax-free subsidies vs. a limited circle of acceptance points

There are two ways to redeem a voucher or a credit card at a limited circle of acceptance points:

• Redemption at a municipal or regional retail/service association in Germany,
  ● Redemption in retail/online shops of a specific chain or a selected association.

In the second case it is necessary to maintain a consistent appearance, e.g., a common brand. In both cases, the voucher or coupon can be viewed as a non-cash benefit and thus as a tax-free grant. It does not matter which legal form the association has, i.e., cooperative, branch or franchise, or whether the voucher or card has a fixed amount (as long as the value is clear).

Tax-free benefits for employees and access to a limited number of services or products

Vouchers and cash cards can be considered non-cash benefits if they give access to a limited number range of products or services. The following examples can be cited:

• Sports and fitness cards,
  ● Vouchers for passenger transport (both local and long-distance) – additional services such as electric scooters, “Park and Ride” parking spaces, and train restaurants are also considered here,
  ● Credits for purchasing books and audiobooks on paper,
  ● Credits for streaming entertainment offers,
  ● Credits for purchasing fuel or energy for charging a car,
  ● Vouchers for cosmetic or hairdressing services,
  ● Clothing vouchers (excluding accessories and jewelry).

Tax benefits for employees and the use of a card or voucher for a specific purpose

non-cash benefits can be cards or vouchers that are used for a specific – social or tax – purpose. It is important that they are secured by public law. The form of tax-free benefits for employees must be appropriately limited and must not correspond only to general purposes of tax-free non-cash benefits. Examples are:

• a meal voucher for a social facility,
  ● a credit card for company health measures, which are tax-free up to six hundred euros per employee per year,
  ● a Credit card for rehabilitation or medical services.

Tax-free benefits for employees – what should you know about payment cards and vouchers?

Certain features of vouchers and payment cards cause them to cannot qualify as tax-free benefits for employees. This applies in the following cases:

• when the card or voucher offers a too broad spectrum of services/products,
  ● when the card has its own IBAN number,
  ● when the card offers a service or product and is used for withdrawing money,
  ● when the card is nationwide used as a means of payment for acquiring an unlimited number of products or services,
  ● when the card is accepted as a general means of payment,
  ● when the card is used for transferring money via online services.

It is important to know that the costs charged by providers of card and voucher systems for their setup or refill are included in the cannot value limit of fifty euros per month, and that the impact on the employee occurs when they receive a voucher or card from an  enthalten sind, und dass die Auswirkungen auf den Arbeitnehmer eintreten, wenn er einen Gutschein oder eine Karte von einer external source.

Income tax-free subsidies – Summary

To fully understand all changes from 2022 in regard to tax-free grants to employees, it is advisable to consult a tax advisor. A qualified person will certainly be able to answer all your questions and may even suggest using free tax software to ensure your annual tax refunds are no longer a problem for you in the future.