What is a benefit in kind?
A benefit in kind (Sachbezug) is a pecuniary advantage that the employer grants in addition to salary and that does not consist of cash: goods, services, usage benefits or earmarked vouchers. In principle, such a benefit counts as employment income and is therefore taxable — but tax law contains several exceptions that make the benefit wholly or partly free of tax and social security contributions.
It is important to distinguish this from a cash payment. Since 2022, vouchers and payment cards only count as a benefit in kind if they entitle the holder exclusively to goods and services and meet the criteria of the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz). A card with a cash withdrawal function, or a subsequent reimbursement of costs, counts as cash pay.
The key thresholds and allowances
| Benefit | Limit | Special feature |
|---|---|---|
| Sachbezugsfreigrenze (tax-free benefit-in-kind threshold, § 8 (2) EStG) | €50 per month | Threshold: at €50.01 the full amount becomes taxable |
| Small gifts for personal occasions (Aufmerksamkeiten) | €60 per occasion | Birthday, wedding, birth — no cash |
| Company event | €110 per event | Allowance (Freibetrag), maximum two events per year |
| Staff discount allowance (Rabattfreibetrag, § 8 (3) EStG) | €1,080 per year | Only for goods from the employer's own range |
The difference between a threshold (Freigrenze) and an allowance (Freibetrag) determines real money: if a threshold is exceeded, the entire benefit becomes taxable. With an allowance, only the amount exceeding it remains taxable.
Typical use cases
- Fuel card or retail voucher within the €50 limit, granted monthly and not accumulable.
- Job ticket and Deutschlandticket for journeys between home and the first place of work — tax-free under § 3 No. 15 EStG if granted in addition to salary.
- Workplace health promotion up to €600 per year and employee, provided the measure is certified.
- Childcare allowance for children not yet of school age — fully tax-free if paid in addition to salary.
- Provision of a company mobile phone and laptop — tax-free under § 3 No. 45 EStG even where there is private use.
The "in addition to" requirement
Almost all these tax privileges require that the benefit is granted in addition to salary already owed. A salary conversion — where the employee waives pay in exchange for the voucher — is therefore generally harmful. Record the additional nature of the benefit in writing, ideally in a short addendum to the employment contract.
Documentation and the payroll account
Every benefit in kind belongs in the payroll account (Lohnkonto) — with date, value, occasion and recipient. Keep receipts, voucher numbers and the benefit agreement. In a payroll tax audit, missing documentation — not the benefit itself — is the most common reason for a retrospective tax assessment.
For benefits to business partners and employees that cannot be fitted within a threshold, § 37b EStG offers flat-rate taxation at 30 percent plus solidarity surcharge and church tax. The decision applies uniformly to all benefits granted to the relevant group of recipients in a given year.
Why this belongs in writing
You should ensure that benefit agreements, reservations of revocation and notifications about new benefits are demonstrably delivered to employees. A signed letter in the personnel file carries more weight in a dispute than an email sitting in the inbox of an employee who left long ago.
Common mistakes in practice
| Mistake | Consequence | Better |
|---|---|---|
| Voucher worth €50.01 or two vouchers in the same month | The full amount becomes taxable and subject to contributions | Pick a constant monthly value below the limit |
| Saving up unused monthly amounts | The exemption limit applies per month, not per year | Issue the voucher anew each month |
| Salary conversion instead of an extra benefit | Many exemptions no longer apply | Agree the additional nature in writing |
| Birthday gift above €60 | No longer a courtesy gift but wages | Check the value, use § 37b EStG if needed |
The limits reflect the state at publication. Check current values with your payroll team or tax adviser before introducing new benefits.
Benefit notice to employees: what to include
- Type of benefit (e.g. monthly goods voucher) and value
- Start, period and a note that it is paid in addition to salary
- Any voluntary or revocation reservation, clearly worded
- Contact person for questions
You can write such a notice in the online letter editor and have it delivered as a real letter. For layout, see the DIN 5008 letter template guide.