Goods that a company makes available to its employees are referred to as monetary benefit. All goods that have a monetary value and are made available to the employee free of charge or at a reduced price represent pecuniary benefits. It is important that the benefit is based on the employment relationship. Benefits of a monetary value must be declared in the income tax return of employees. Pecuniary benefits may seem appealing to most workers, but those who enjoy pecuniary benefits should keep in mind that they have an impact on income tax.
The types of monetary benefits
In terms of tax law, income from employees that does not represent financial resources but represents economic benefits is referred to as benefits in kind. Benefits in kind are benefits in kind that are related to the employment relationship and can be partially or fully used privately. The pecuniary benefits are subject to Section 8 of the Income Tax Act. These benefits in kind are part of the employees’ taxable wages. Pecuniary benefits do not have to be claimed for tax purposes if, after deducting the remuneration to be paid by the taxpayer, an amount of no more than 44 euros per calendar month remains. The current exemption limit per month is 44 euros. Pecuniary benefits can be provided in various forms, for example as
- Company car that can also be used privately
- Room and board for domestic workers
- Opportunity for employees to purchase goods or services cheaper or completely free of charge due to the employment relationship; a company can grant its employees staff discounts or allowances.
- Opportunity for employees to buy shares in their company. The employee can be granted a difference between the current market value and the base value of shares.
- Fuel vouchers
- Company mobile phone that can also be used privately.
According to foodanddrinkjournal, this is only a series of examples, but benefits in kind can also be granted in other forms. The free use of a company kindergarten can also represent a pecuniary benefit for the employee. Gifts on special occasions, for example for a special performance by the employee, represent pecuniary benefits. Whether these gifts have to be claimed in the income tax return depends on their value. In most cases, the value of the gifts is less than the allowance for monetary benefits.
Creation of monetary benefits
Taking into account the exemption, benefits in kind are taxable. Benefits in kind always arise when the benefit in kind for the employee represents a consideration by the employer for the services provided by the employer. Benefits in kind are voluntary benefits provided by the employer. They represent consideration for the work done. Not all benefits or gifts from the employer for the employee, however, represent a pecuniary benefit. For example, if the employer gives the employee theater tickets on his birthday, this represents a personal benefit for the employee, not a pecuniary benefit. The employee does not have to take these theater tickets into account for tax purposes. However, if the theater tickets are granted for a special performance by the employee, for example for the performance of a service at a certain point in time, then they are considered a pecuniary benefit and must be taken into account under tax law.
Tax treatment of pecuniary benefits
According to Section 8 of the Income Tax Act, pecuniary benefits are set at the final price, which is reduced by discounts, at the place of delivery. Legal requirements exist for the provision of a company car, which can also be used privately, or for the provision of food and accommodation for domestic workers. The basis for the provision of food and accommodation is the statutory ordinance in accordance with Section 17, Paragraph 1, Clause 1, No. 3 of Book Four of the Social Code. In accordance with the Social Insurance Remuneration Ordinance, benefits in kind for meals are made up of the values for breakfast, lunch and dinner. These values change from year to year. Benefits in kind are tax-free if the total amount per calendar year does not exceed 1,080 euros. For employee benefits from the company, which are provided in addition to the agreed performance of the employee and the applicable consideration from the employer, there is the possibility of assuming 30 percent of the income tax according to Section 37b Income Tax Act. This flat tax represents the final taxation for the employer.
Data processing devices such as computers and smartphones, which are given away by the company or offered at a lower price, are usually tax-free. The employer has to pay tax on the monetary benefit and give you the device in addition to your wages.