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When do vouchers that are given to employees constitute a benefit in kind?

Benefits in kind that employers give to their employees are exempted from tax and social security charges up to a monthly exemption threshold of € 44. The common practice of subsequently reimbursing employees € 44 upon presentation of a sales receipt and classifying this as a benefit in kind subject to preferential tax treatment has no longer been possible since 1.1.2020. The 2019 Annual Tax Act specified precisely which employee benefits should now be viewed as cash remuneration and which should be viewed as benefits in kind.

New rules with exceptions

In future, monetary income (cash remuneration) will also include all:

  • cash payments for a specific purpose,
  • subsequent reimbursements of costs,
  • monetary surrogates and
  • other benefits that are denominated in a cash amount.

There is however an exception to these rules: vouchers and cash cards that entitle the holders to receive goods or services only will be considered to be a benefit in kind, in any case, if they fall under the exemption provision in Section 2(1) no. 10 of the German Payment Services Supervision Act. In this case, the cards have to entitle the employee to receive goods or services from the issuer of the voucher or at a limited number of acceptance points or from a limited range of goods or services. Therefore, items that are recognised as a benefit in kind are, e.g.:

  • pre-paid gift cards for retailers,
  • centre gift cards and “city cards”,
  • so-called station cards from petrol station operators that entitle holders to receive goods or services solely at that petrol station,
  • fuel cards that only entitle holders to purchase fuel and “everything that keeps the car moving” (also throughout Europe), or
  • something like cinema tickets.
  • Likewise, cards that have social or tax purposes can also be regarded as benefits in kind. Examples might include a voucher to participate in rehabilitation or workplace health activities (treatment card).

The particularities of online stores and cash cards

However, a distinction has to be made in the case of online stores. If the payment instrument can only be used to buy goods or services that are physically provided on site then this form of benefit will acquire a tax-privileged classification (compensation in kind). By contrast, if the operator runs a pure online marketplace that provides a platform for other suppliers to offer goods and services then this would be deemed to be cash remuneration. Therefore, Amazon vouchers constitute cash remuneration and not benefits in kind.

Furthermore, it should be noted that cash cards would be deemed to be cash remuneration if they can be used as a substitute for cash within the framework of independent systems for non-cash payment transactions. In particular, certain cash cards that are equipped with a cash payment function or their own IBAN that are used for electronic transfers (e.g. PayPal) or to buy foreign currencies (e.g. pound sterling, US Dollar, Swiss franc) or that can generally be assigned as a payment instrument should, thus, be treated as cash payments. Such cards are taxable from the very first Euro onwards.

Please note: Finally, another new element is that vouchers and cash cards only fall under the € 44 rule if they are provided in addition to the remuneration that would in any case be due. The tax advantage for salary conversions thus no longer applies.

Recommendation: In order to avoid unpleasant surprises during a subsequent tax audit you should carefully scrutinise the benefits in kind that you have given out.

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