German news. 600 euros instead of inflation bonus. Thanks to the new government approved aid package, companies in Germany can pay their employees the so-called inflation bonus of up to €3,000. However, not many companies are able to pay such a high bonus, but they can grant their employees tax-free material bonuses totalling 600 euros. Here is all you need to know.
With the high costs of living and inflation in Germany, the ruling coalition has approved another aid package. The package includes; energy bonus for students and trainees, pensioners, an increase in child benefit and brake on electricity prices. Additionally, the relief package also includes a special inflation bonus for almost all employees working in Germany. The bonus is tax-free up to 3,000 euros and must be paid by the end of 2024.
Note the inflation bonus is not mandatory. Each company independently decides whether to pay money to its employees or not. This means not all workers will receive the money.
However, Employees who do not receive the inflation bonus may receive untaxed benefits in kind with a total value of up to 600 euros.
Under the 2022 rules, companies can give their employees non-cash allowances worth €50 a month – that’s 600 euros a year. The advantage of in-kind bonuses is that the employer does not have to deduct any taxes or contributions from them.
There are different possibilities as to what these goods or services might be, but most important is to comply with the updated regulations.
Until recently, companies could give employees prepaid gift cards that could be used in any store. This however contradicted with the requirement regarding benefits in kind. The Federal Ministry of Finance clarified the regulations by introducing a distinction between cash and non-cash benefits.
According to the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG), for example, the following vouchers or cash cards are considered as in-kind supplements:
- Vouchers for purchases on Amazon or other online stores that have a Marketplace are not allowed because the assortment is not limited there.
- Vouchers and cards for selected products, e.g. fuel vouchers, bookstore vouchers, fitness club passes or cards with access to streaming channels.
- Gift vouchers and gift cards that are only accepted in selected stores or chain stores.
You can take advantage of the exemption limit of €50 per month several times, if you have several employers. The same applies to employees on mini-jobs. Remember not to exceed the tax-free amount. If you do this, you will have to pay tax on the entire amount.