Non-cash benefits allow both employers and employees to benefit from lower tax deductions within set limits. For employees, these additional perks increase a company's attractiveness as an employer and improve their standing in the job market. In this article, we provide an overview of tax-free allowances and limits, as well as examples of non-cash benefits.

What is a non-cash benefit?

A non-cash benefit refers to benefits in kind (non-cash wages or benefits) that can be offered to an employee in addition to their salary. As the term suggests, employees receive extra perks that have a monetary value. By using them, employees save on costs they would otherwise incur. According to Section 8 of the German Income Tax Act (EStG), a non-cash benefit is always considered income and is treated by the tax authorities as taxable and social security-liable income. There is no legal entitlement to these additional non-cash benefits.

Examples of non-cash benefits and benefits in kind

There are numerous benefits in kind that can be offered to employees as perks. Classics include a company car that can also be used for private purposes, or meal vouchers that can be used individually. These can be redeemed at selected restaurants or supermarkets, among other places. Furthermore, company laptops and mobile phones, as well as company pension schemes, are considered non-cash benefits for employees.

Companies have a wide range of options when it comes to non-cash benefits:

• Company car
• Commuter allowance
• Company housing
• Company mobile phone or laptop
• Gym memberships, meal vouchers, or fuel vouchers
• Complimentary office snacks or other refreshments; discounts or access to company goods or services at a reduced rate (e.g., hotel rooms or flights)
• Equity participation
• Company pension scheme
• Frequent flyer miles
• Relocation costs for work-related moves

Other options include Christmas giftsA year-end "thank you" is a great way to celebrate successes and reward your employees' hard work. If you need some inspiration on which corporate benefits to consider, we’ve put together a few tips for you.

The benefits of tax-free perks as an alternative to salary increases

Non-cash benefits can be used by companies in a variety of ways. They are an excellent way to show appreciation for an employee or to reward exceptional performance or a long-awaited achievement.

Non-cash benefits can increase a company's appeal in the job market. For a long time, "fresh fruit daily" was a common perk, but in industries facing a skills shortage, it no longer holds much sway. Companies need to come up with creative solutions to stand out from the competition.

When it comes to salary negotiations or job offers, non-cash benefits can be the deciding factor. If the budget for a salary increase is limited, offers including non-cash benefits are highly relevant. They are more cost-effective due to tax advantages, and employees benefit from higher net pay.

Tip: A tip from us that has always proven its worth: tailor the non-cash benefit to the individual needs of each employee. Boosting employee retention through non-cash benefits can really pay off for the company.

Basic rules for non-cash benefits

Calculating non-cash benefits may seem complicated and complex at first glance. However, it can be broken down into a few basic rules for easy handling.

• Non-cash benefits are tax-free up to a monthly amount of 44 euros. However, this amount cannot be accumulated to provide a larger benefit in December or once a year.
• Staff discounts are tax-free up to four percent of the discount. The maximum amount is 1,080 euros per year.
• The non-cash benefit for a company car is based on the one-percent rule or a mileage log.

If the 44-euro exemption limit is exceeded, the entire amount must be taxed. With a tax-free discount allowance, only the difference exceeding the set limit of 1,080 euros per year is subject to tax.

Taxation and tax-free allowances for non-cash benefits

The Income Tax Act stipulates that various non-cash benefits must be taxed. However, numerous exceptions have been established in this context, which further increase the attractiveness of non-cash benefits.

As a rule, non-cash benefits are processed via the payroll. The value is added to the gross salary and then deducted from the net amount. As an additional incentive, certain non-cash benefits are tax-free. The law distinguishes between a tax-free allowance and an exemption limit.

• Meal allowance: The meal allowance can be up to nine euros per day and remain tax-free. The non-cash benefit values for employee meals have proven to be particularly attractive in numerous companies.
• Aworkwear: Workwear that is not worn for private purposes can be provided tax-free.
• Childcare subsidies: Many employees find kindergarten subsidies for school-age children attractive, as they remain tax-free. In addition, there is up to 600 euros per year available for short-term emergency childcare for (non-disabled) children under 14.
• Health promotion: Health promotion is increasingly becoming a focus of corporate policy. The tax-free allowance of up to 500 euros per year benefits not only the employees but also the company through reduced absenteeism.
• Professional development: If professional development training is in the company's interest, the costs can also be treated as a non-cash benefit.
• Food & drink: Snacks and drinks provided to employees at the company are also tax-free benefits in kind.
• Company events: Events and team activities strengthen cohesion. Therefore, a budget of 110 euros per employee can be allocated twice a year, provided that everyone in the company has the opportunity to participate. Book your next team event with heycater!
• Company parking: Especially in urban areas, a company parking space can be a blessing. In many places, the time saved is of great importance.
• Technical equipment: Company mobile phones or laptops can be provided by the company tax-free. A key requirement is that the devices remain the property of the company. If an employee leaves, there are three options: the device is returned to the company, it is purchased from the company, or it can be gifted to the employee subject to a 25% flat-rate tax.

Company car as a non-cash benefit

Company cars hold a particularly high status, especially in Germany and within certain industries. Calculating the taxable benefit is a unique process, for which there are two different methods: the one-percent rule or a mileage log. Most companies and employees opt against the mileage log because, without automatic recording, it involves an extremely high administrative burden.

• One-percent rule: Under this method, employees are taxed monthly on 1% of the vehicle's gross list price, plus 0.03% for every kilometer between their home and workplace. For a vehicle with a new price of 30,000 euros and a commute of 50 kilometers, this results in a total of 300 euros + 450 euros. Consequently, 750 euros is added to the employee's gross salary as a taxable benefit.
• Mileage log: This requires every trip to be documented precisely.

Tip: Electric company cars receive tax advantages.

Catering for employees with heycater!

Do you want to treat your team to healthy, delicious meals, or are you looking for catering for your next company event? With heycater!, you can easily order catering for your team and guests. If you would like to offer employees a taxable benefit in the form of regular, free, or discounted meals, we are also your go-to partner.