Company cars and the like: how to pay tax on non-cash benefits

In many companies, employees are not only remunerated in the form of salary and bonus payments, but also through additional benefits or non-cash remuneration. As a rule, these so-called non-cash benefits are taxable. But what exactly are non-cash benefits and what should be considered with regard to taxation?

What is a non-cash benefit?

The term ‘non-cash benefit’ is used in income tax law and refers to the benefit an employee receives when material assets or services are provided free of charge or at a reduced price.

The monetary value of the benefit corresponds to the amount that the employee would have to pay to purchase the service or goods in question at the regular retail price at the place of delivery (including VAT). As a rule, this amount is considered taxable wages.

Typical examples of non-cash benefits are:

• Job ticket: cheaper ticket for public transport
• Job bike: use of a bicycle through a leasing
• Company car: use of a company car for private journeys
• Use of company assets by third parties: use of company mobile phones or laptops for private purposes
• Assumption of costs for memberships: gym subscriptions or other leisure activities
• Meal allowances: vouchers or free meals.

What is the difference between imputed income and remuneration in kind?

Remuneration in kind is a subcategory of imputed income with specific tax advantages (exemption thresholds), whereas all imputed income is generally taxable:

• The term ‘remuneration in kind’ covers non-monetary remuneration granted by the employer to the employee in the form of goods or services (e.g. use of a company car for private purposes). These are tax-free up to an exemption limit of €50 per month. If this limit is exceeded, the excess amount is taxed as a non-monetary benefit.
• The monetary advantage is any kind of advantage that represents a monetary benefit and is not paid out directly in cash (e.g. earmarked cash benefits such as fuel subsidies granted by the employer for specific purposes, subsequent reimbursements of costs, monetary surrogates such as vouchers, employer loans, employee shares, incentive trips). Non-monetary benefits are generally taxable, but there are a number of exceptions depending on the type, value and purpose of the benefit.

How is the imputed income taxed?

In principle, all imputed income granted by the employer to the employee is taxable. As a rule, taxation is carried out via the wage tax and the social security contributions that the employer withholds and pays to the tax office.

In addition to individual taxation, flat-rate taxation is also possible. There are various tax-free allowances and deductions for non-cash benefits:

• Lump-sum taxation – with a monthly tax-free limit of €50 and a discount allowance of €1,080 per year or 4 per cent. The discount allowance applies to discounted services or products provided by the employer, e.g. at staff purchases.
• Individual taxation: non-monetary benefits are added to the gross wage and offset according to individual tax rates.

Tax treatment of various fringe benefits

Die Versteuerung von geldwerten Vorteilen ist nicht immer einheitlich, da sie je nach Art des Vorteils unterschiedlich behandelt werden. Einige Beispiele:

Fringe benefit of a company car

Bei der Nutzung eines Firmenwagens für private Fahrten wird monatlich 1 Prozent des Listenpreises des FaIf a company car is used for private journeys, 1 per cent of the vehicle’s list price is taxed monthly as a non-cash benefit. In addition, 0.03 per cent of the list price per kilometre is calculated for journeys between home and work.

There are special rules for the non-cash benefit of hybrid and electric company cars:

• For pure electric vehicles and fuel cell vehicles with a list price of up to €60,000, only a quarter of the list price has been assessed as a non-cash benefit since 2020. For more expensive electric cars and certain hybrid vehicles, the list price is halved. These regulations apply to employees as well as entrepreneurs and the self-employed.
• In addition, there is a halving of the tax base for company car taxation for electric and externally chargeable hybrid electric vehicles, so that only 0.5% of the list price has to be taxed under the 1% rule. For hybrid vehicles, statutory ranges or emission specifications must be observed, which change depending on the year of purchase.

An alternative to the 1-percent rule for the taxation of the monetary advantage is the logbook method. In this case, the proportion of private use of the vehicle is determined on the basis of a detailed logbook.

Vouchers and benefits in kind for employees

Gifts, vouchers or benefits in kind for employees are tax-free up to an allowance of €50 per month. If these allowances are exceeded, the entire benefits in kind are taxable.

Meals

Free or subsidised meals provided by the employer also represent a non-cash benefit. The non-cash benefit values for 2025 are as follows:

Breakfast: €2.30
Lunch or dinner: €4.40 each

Company pension

A non-cash benefit can also be provided in the form of a company pension. Employers can pay contributions for their employees up to a certain amount free of tax and social security contributions. However, these benefits are taxable when they are paid out later.

Health promotion

Employers may provide their employees with up to €600 per year for health-promoting measures on a tax-free basis. However, this does not apply to membership fees for sports clubs or fitness centres.

Shares for employees

Up to €2,000 of tax-free company shares per year are tax-free.

Employer loans

The interest advantage on loans of up to €2,600 is tax-free.

Bonus miles or staff discounts

An allowance of €1,080 per year applies to both.

Work clothes

Work clothes are tax-free provided they are used exclusively for work.

Non-cash benefits and social insurance contributions

In addition to income tax, social security contributions must also be paid on the monetary advantage. It is important to distinguish here between:

• advantages in the company’s own interest: This concerns advantages in which the employer’s interest is in the foreground, e.g. further training costs. These are exempt from social security contributions.
• advantages as remuneration: monetary advantages as additional remuneration are subject to social security contributions.

Taxing non-monetary benefits correctly and avoiding pitfalls

It is important for employers and employees alike to ensure that non-monetary benefits are taxed correctly in order to avoid tax pitfalls. In principle, tax must be paid on all non-monetary benefits, but there are numerous regulations and allowances that can minimise the tax burden. Employers should therefore be sure to find out exactly what the tax implications of the benefits offered are and consult their tax advisor if necessary.

If you have any questions about the tax implications of the non-cash benefit or require assistance with the correct taxation, please do not hesitate to contact us.