A so-called “benefit in kind” is defined as income from an employment relationship that is not provided in the form of money. These pecuniary advantages can take the form of benefits in kind, non-cash benefits or additional benefits. Benefits or wages in kind are exempt from tax and social security contributions up to a limit of € 44 (increased to € 50 from 1 January 2022) per month. This results in financial advantages compared to the payment of cash wages (which are subject to tax and social security contributions).
In its letter of 13 April 2021, the Federal Ministry of Finance (BMF) comments extensively on the difference between cash benefits and benefits in kind, since these terms were redefined in the German Act on the further fiscal promotion of electric mobility and on the amendment of other tax provisions (Gesetz zur weiteren steuerlichen Förderung der Elektromobilität und zur Änderung weiterer steuerlicher Vorschriften). According to the Act, it is now prescribed by law through the new definition of “monetary income” that earmarked cash benefits, subsequent reimbursements of costs, cash surrogates (cash substitutes) and other benefits that are denominated in a monetary amount are in principle not benefits in kind but cash benefits.
Certain earmarked vouchers (including corresponding gift cards, digital vouchers, voucher codes or voucher applications/apps) or corresponding money cards (including prepaid cards), on the other hand, are legally defined as benefits in kind, provided that the vouchers or money cards exclusively entitle the holder to purchase goods or services from the employer or a third party and also meet the criteria set out in the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG) from 1 January 2022. A further condition is that they are granted in addition to the wages payable in any event.
Transitional arrangement: The tax authorities do not intend to raise any objection if vouchers and money cards, which exclusively entitle the holder to purchase goods or services but do not meet the criteria of the ZAG, are still recognised as remuneration in kind until 31 December 2021.
Note: Since the individual regulations are quite complicated for the tax layman and therefore bear financial risks, you should seek detailed advice.
Photo: Adobe Stock, joda
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