Employee benefits and their tax treatment

Employee benefits are an increasingly important tool for attracting and retaining good people. From meals and sport to training – every benefit also has a tax and contribution side that needs to be assessed correctly. A wrong set-up can turn an attractive perk into an unexpected cost that weighs on both the employee and the company in a subsequent inspection.

Which benefits companies most often provide

The range of benefits is wide, and companies combine them according to the needs of their teams and their budget. Their tax treatment differs depending on the nature of the benefit and the manner and form in which it is provided, so it cannot be assessed across the board.

• meal allowance,
• sports, cultural and recreational activities,
• training and development,
• supplementary pension saving and health.

Tax treatment on the employee’s side

Some benefits are exempt from tax and contributions for the employee, while others are treated as taxable income that increases both the tax base and the assessment base for contributions. What matters is whether the law provides a specific exemption for the benefit in question and whether its conditions are met, including any value limits. As the exemption limits change, always check the current figures before introducing a benefit.

The employer’s perspective and tax deductibility

For the company, the key question is whether the cost of the benefit is tax-deductible, that is, whether it reduces the tax base. Some benefits are deductible provided the conditions are met, for example if the entitlement arises from the law, an internal policy or a collective agreement. Other benefits are assessed more strictly and may not be deductible. Correct classification therefore directly affects the company’s tax result.

How to set up benefits efficiently

The aim is for the benefit to bring the employee maximum value at an optimal tax and contribution burden. It therefore pays to assess each benefit in advance and to lay down the rules for providing it.

1. choose the benefit according to the team’s needs,
2. assess the exemption for the employee,
3. check tax deductibility for the company,
4. lay down the rules in an internal policy.

Why correct assessment matters

Classifying a benefit incorrectly can lead to additional tax and contributions in an inspection, which harms both the employee and the company. Professional payroll and accounting ensure that benefits are assessed correctly and that the company makes full use of the available exemptions and reliefs.

Internal policy and fairness of benefits

For benefits to be not only correct from a tax point of view but also fairly distributed, it pays to lay them down in an internal policy or in a collective agreement. Clear rules determine who is entitled to a benefit, under what conditions and in what amount, which prevents a sense of unequal treatment among employees. The policy also serves as evidence in an inspection that the cost of the benefit is backed by an internal regulation, which is often a condition of its tax deductibility. When introducing a new benefit, it is therefore advisable to assess its tax treatment and, at the same time, the way the company will document it. Well-designed benefits thus strengthen the team’s loyalty while keeping costs under control. It is also advisable to review regularly whether the benefits provided still match the needs of employees and the legislation in force, as the conditions for exemption change over time.

Do you want to set up benefits so that they are attractive to employees and optimal from a tax point of view? The Bilvao team will prepare a tailor-made solution for you.

Related articles: Home office and how to set it out in the employment contract, Sick leave and income compensation: who pays for the first days, Social fund: creation and use.

Frequently asked questions

Are all employee benefits exempt from tax?

No. Some benefits are exempt if the conditions are met, while others are taxable income of the employee and are also subject to contributions. The exemption limits change, so check the current rules before setting anything up.

Is the cost of benefits a tax-deductible expense for the company?

Some benefits are tax-deductible if they arise from the law, an internal policy or a collective agreement and the conditions are met. Others are assessed more strictly, so it pays to assess each benefit individually.