Differentiation between cash benefits and benefits in kind

Since 01.01.2020, the scope of tax-privileged benefits in kind has been restricted by a legal definition of the term "benefit in kind". This affects in particular the use of the 44 €-wage tax exemption limit for non-cash benefits, the lump sum taxation in accordance with section 37b of the German Income Tax Act (EStG) as well as the wage tax exemption limit for non-cash benefits (gifts) up to an amount of 60 € gross for personal events of employees (e.g. birthdays, marriage, service anniversary) and the 110 € wage tax exemption limit for celebrations on personal occasions of employees (e.g. service anniversary). However, vouchers and prepaid cards continue to be eligible as non-cash benefits under certain conditions.

In the letter of the Federal Ministry of Finance (following BMF) dated 13^th April 2021, the tax authorities published rules for applying the amended statutory provisions, which most of them are already valid retroactively since 1^st January 2020.

Only the requirements of section 2, paragraph 1, No. 10 of the Payment Services Supervision Act (Zahlungsdienstaufsichtsgesetz - ZAG) for vouchers and prepaid cards has to be met as of 1^st January 2022 to apply for the tax allowances for non-cash benefits. Provider as well as employer, who distribute vouchers and prepaid cards have now to adapt their offerings to the new tax requirements. In this newsletter, we present the regulations of the BMF dated 13^th April 2021.

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