Bonuses are taxed at 40
Tax-free benefits to employees: Corona bonus is being extended
"Hey boss, I need more money!" If the boss finally agrees to a raise after tough negotiations, the rude awakening comes with the next pay slip. Social security contributions and taxes quickly consume the supposed plus on the pay slip. Last year, the taxpayers' association did a calculation of what employees are left with from every euro they earn, if social security contributions and taxes are deducted. The result is frustrating at first glance: It's only 46.3 cents. At 53.7 cents, more than half of every sourly earned euro goes directly to the state through taxes and social security contributions.
But that need not be. With negotiating skills, one can agree on extra salary that do not cost taxes or social security contributions, even with the same income - instead of special payments and tariff increases. Because the company also benefits from this, many HR departments are ready to negotiate. Experts in demand on the job market cleverly use their bargaining power to score points in the salary poker and also to beat the tax office. A lot is possible.
The corona pandemic resulted in a significantly higher burden for most employees. To mitigate this a little, the legislature introduced the so-called corona bonus last year, which was extended again at the turn of the year until mid-2021. In the following you can read what the exact regulations for the corona bonus are and what other tax-free salary extras are available.
What is the corona bonus?
Now employees and companies have a little more time to use the tax-free corona bonus of up to 1,500 euros: With the Annual Tax Act 2020, which was passed at the end of December last year, the Bundestag extended it again until the summer of 2021. The bonus was introduced in the spring in order to be able to financially reward additional burdens for employees due to the corona pandemic.
First of all, every employer was allowed to pay out grants and support up to an amount of 1,500 euros to their employees between March 1, 2020 and December 31, 2020 - this is now possible until June 30, 2021. Taxes and social security contributions are completely eliminated here. The exact details are regulated in a letter from the Federal Ministry of Finance dated October 26, 2020 (Az. IV C 5 - S 2342/20/10012: 003) as well as an extensive FAQ catalog from the Federal Ministry of Finance, which can be accessed on the Ministry's website.
- Most important condition: The boss has to pay the special bonus in addition to the wages that the employee is entitled to anyway.
How do I get the tax-free corona bonus?
In order to fully utilize the regulation by the end of June 2021, employees should seek a discussion with their boss or the works council and look for options together. Some employers might be motivated to give their employees a corona bonus for the first time after the turn of the year. Important: The tax-free amount of 1,500 euros for grants or support services can only be claimed once in the period from March 1, 2020 to June 30, 2021. With the extension of the deadline, the tax-free allowance remains unchanged. And: a salary conversion or a salary waiver by the employee in exchange for a subsequent bonus does not work.
Corona bonus also for mini-jobs and part-time jobs
The tax-free bonus can also be used by employees with fixed-term employment contracts, part-time employees, employees on short-time work or mini-jobbers. Any special payment from the employer will not be offset against the short-time work allowance or the 450 euro limit. The 1,500 euros are a tax-free allowance for cash or benefits in kind from the employer - company bosses are free to make higher special payments to their employees. The excess amount then has to be taxed. The bonus can also be paid alongside or combined with other tax-free extras.
- Biallo tip: The tax exemption applies to every employment relationship. Employees who are paid for by several employers can therefore also receive the tax-free bonus several times.
Family and retirement provision
Day care contribution
Instead of increasing the salary by a few hundred euros per year, one could suggest that the employer pay the kindergarten costs for the offspring who are not yet of school age. The subsidy for the kindergarten remains tax-free and the company also benefits, because it saves the additional taxes that arise with a regular wage increase. The fee for a childminder can also be sponsored with low taxation. "In terms of amount, there is no upper limit - the contribution for daycare or childcare can be subsidized or completely covered by the employer - even for stepchildren or grandchildren who have taken them into your household," says tax advisor Wolfgang Wawro from Berlin.
Short-term care and support
For the short-term care of children up to 14 years of age or relatives in need of care, the employer can add up to EUR 600 tax-free annually to the agreed salary. This is also available for care at home. However, the basic requirement is that the employee was fully involved in the company and that the employer therefore reimburses the necessary private care costs for carers or babysitters in an emergency.
The company is allowed to pay every employee a tax-free recovery allowance - in addition to the taxable vacation pay or as the sole extra. There are 156 euros for the employee, 104 euros for the spouse and 52 euros per child. The company pays 25 percent flat-rate wage tax on the bonus.
If there is a change of scene for professional reasons, employees can have the boss reimbursed a flat rate for other moving costs without receipts in addition to the proven individual costs for brokers and forwarding or alternatively claim them for tax as income-related expenses.
If you have moved into the new apartment by the end of May 2020, there are 820 / 1,639 euros (single / married). There is an additional 361 euros for each child. If the youngsters need tuition after changing schools, there is an additional 2,066 euros. For removals from June 1, 2020, the tax authorities have adjusted the flat rates (BMF letter of May 20, 2020). The day on which the moving boxes and furniture were loaded is decisive. Replaced tax-free or deductible as income-related expenses is now only a basic flat rate of 860 euros for the employee himself - the previously granted surcharge for married people is no longer applicable. There is a uniform 573 euros on top for each family member who moves with you. A lump sum of 1,146 euros currently applies to tutoring.
Tax-privileged provisions can also be made for old age - with company pension schemes. Through the company, you can invest up to 3,312 euros in wages, tax-free and social security contributions, for example in direct insurance, pension funds or pension funds. A maximum of four percent of the contribution limit for statutory pension insurance in the western federal states remains tax-free. Up to this amount, neither taxes nor duties are incurred for the company.
Anyone who works for a larger company can, depending on the legal form of the employer, invest up to 360 euros a year tax-free in employee shares, funds or cooperative shares - voluntary special payments such as vacation or Christmas bonuses can be used for this. The employer often grants a preferential price to purchase the shares.
Health and education
Since the beginning of 2020, the employer has also been able to cover the costs of vaccinations, courses to better manage stress, weight reduction or smoking cessation or driver safety training, in addition to the agreed salary, up to an amount of 600 euros per year tax-free.
In order to be tax-exempt, the health-promoting measure must meet certain requirements (quality, earmarking, certification). Membership fees to sports clubs, fitness studios and similar facilities are also subject to the tax exemption if participation in certified courses requires membership and the costs of the courses are accounted for via membership fees and evidenced by certificates (decision of the regional tax office in Karlsruhe dated July 21, 2020, Az. S 2342/135 - St 142).
Professional training and further education services of the employer remain completely tax and duty-free if the training is carried out in the predominantly internal interests of the company. Since the beginning of 2020, advanced training such as language or computer courses have also remained tax-free if they generally aim to further develop the employee's professional skills.
Travel expenses, company car and e-bike
If the boss donates a free monthly or annual ticket or a Bahncard for the daily commute to work, the blessing for all trips in local public transport remains completely tax and duty-free if the employer donates it in addition to the salary (BMF letter of 15. August 2019). "The ticket can then also be used privately, be transferable or used for passengers," explains tax expert Uwe Rauhöft. For long-distance tickets, only the route between home and work as well as business trips is tax-exempt. Taxi costs or plane tickets are not favored. However, the company's tax-free service reduces the tax-deductible commuter allowance.
If, on the other hand, it is a deferred payment, the tax exemption does not apply. Since the beginning of 2020, however, the employer has been able to tax the monetary benefit at a flat rate of 25 percent - there are no social security contributions. The commuter lump sum is deducted in full as income-related expenses despite flat-rate taxation.
Even with a travel allowance, the boss can contribute to the costs of the daily commute. The bonus may be taxed at a flat rate of 15 percent if it is paid up to the amount of the flat-rate distance allowance and in addition to the wages owed anyway. Then there are also no social security contributions.
For employees, the company car or e-bike is a nice extra from the boss. Most of them are also allowed to use their mobile device privately and for their daily commute, thus saving themselves the expensive purchase and maintenance. You have to pay taxes and social security contributions for the monetary benefit from this private use. However, access by the tax authorities can be minimized if one knows the rules of the game. The employer usually determines the value in use of the company car on a flat-rate basis: one percent of the gross list price for normal combustion new cars is added to the salary each month. This also applies to used cars. The model delivered from the factory is always decisive for the tax calculation.
- Note: Anyone who retrofits auxiliary heating, navigation systems or trailer hitch saves taxes. For journeys between home and first place of work, 0.03 percent of the list price is added per kilometer. If you go to the company for a maximum of 15 days a month, the boss can set 0.002 percent of the list price, but must document this to the exact date (BMF letter of April 4, 2018). Wage tax and social security contributions are then deducted from the total salary.
Hybrid or electric vehicles
If electric, hybrid or fuel cell vehicles are used from 2019, the list price for using the one percent method will be halved by the end of 2030. The exemption also applies to electric scooters / e-scooters, e-bikes and pedelecs that are classified as motor vehicles (speeds over 25 kilometers per hour) and certain externally chargeable hybrid electric cars with an electric drive that has a range of at least 50 kilometers.
For purely electric vehicles up to a price of 40,000 euros, only 0.25 percent of the gross list price has applied since the beginning of 2020. The new regulation has been in effect since the New Year for all electric cars purchased since January 1, 2019. New: The limit value was raised by the 2nd Corona Tax Aid Act of June 29, 2020 retrospectively to January 1, 2020 from to 60,000 euros. A look at the pay slips for 2020 can be worthwhile.
- Biallo tip: Your employer was actually obliged to correct the pay slips for the first half of the year if your company car was only subsequently eligible for funding. If no correction has been made during the year - for example, because you have changed employers, you have paid too much wage tax. You can get the overpaid taxes back on your tax return.
If the hybrid or electric car was purchased or leased before 2019, you can deduct the purchase costs for the battery system from the list price - up to 7,500 euros for purchase in 2018. This regulation for the promotion of electric cars has also been in effect for fuel cell vehicles since the beginning of 2018 (BMF letter of January 24, 2018).
Company car in lockdown
Anyone who was forced to work a particularly long time in the home office during the Corona crisis may no longer perceive the company car as a prestige object but as a financial burden. Due to short-time work and an arranged lock-down, the usual trips to the company and customer visits are significantly lower - but wage taxation for private use and trips to work continued as normal. The legislature has not provided for tax compensation outside of the new subsidies for electric cars.
In the 2020 tax return, affected employees can request a retrospective discount with regard to their journeys between their home and their first place of work. This makes sense if you have been to the office for less than 15 days per month (less than 180 days a year). The proportional monetary benefit is then taxed retrospectively on the basis of the days actually driven at 0.002 percent of the list price - instead of 0.03 percent during the monthly payroll (BMF letter of April 4, 2018).
- Biallo tip To do this, you must tell the tax office the days on which you drove to the office in 2020 and prove that your employer has previously taxed the trips to the company according to the higher flat rate method at 0.03 percent of the list price. However, rebilling is only possible for the full year 2020, not only for the months from March 2020 influenced by the corona pandemic (Lower Saxony State Tax Office - order of June 18, 2020 - S 2334-355-St 215).
Note: Working from home has become permanent for a large number of employees and self-employed during the corona pandemic. The home office can be deducted in the tax return with the new home office flat rate. This includes a tax bonus of up to 600 euros.
Way out of the logbook
Instead of the flat rate method, you can also bill the company car on the basis of your self-determined usage value according to your logbook. Together with the boss, you can choose a method at the beginning of the year. A later change in the year is not possible, according to the Federal Fiscal Court (BFH, Az. VI R 35/12). If you bear the costs yourself, ask your boss during the year to reduce the monetary benefit by these costs - this saves taxes and social security contributions. Often your boss will insist on the flat rate method - this is simply more practical for the payroll office.
Note: "Keep a logbook in parallel and switch retrospectively to the logbook method in the tax return. In the tax return for 2020 you will then get back overpaid taxes," advises tax advisor Wolfgang Wawro. Whether it is cheaper and worth the effort to keep a logbook depends on the value of the car and the mileage.
- Rule of thumb: If the car is mainly used for business purposes, the driver's log is worthwhile. If you use a tax-privileged electric or hybrid car, with the logbook method, only half of the vehicle depreciation or leasing rates incurred are included in the annual cost allocation.
If you get the bike from the boss in addition to your salary, you can ride it free of tax and social security contributions until the end of 2030. You do not have to pay tax on the benefit for private use and for the daily commute. Charging the e-bike in the company is also exempt from income tax.
The taxable pecuniary benefit is only calculated on the basis of half the gross list price per month (from 2020 the quartered) with one percent (identical decrees of the highest tax authorities of January 9, 2020). In addition, since the beginning of the year, the employer has been able to choose whether taxation takes place via the employee's payroll at the individual tax rate - or at the flat rate of 25 percent plus solos.
- tip A conversation with the boss can be worthwhile, because with the flat rate taxation there are also no social security contributions for him.
Attention: However, if you want to take over the leased company bike at the end of the term, a trap is lurking. The discounted takeover is taxable. Many providers sell the bike at ten or 20 percent of the list price. The tax office estimates wheels after three years at 40 percent of the list price. The difference between the market price and the takeover value must be taxed as a pecuniary benefit - either at the company's own tax rate or, since the beginning of 2020, also through the employer with 25 percent flat-rate wage tax. Some providers allow themselves to be talked about and take on the tax burden.
Electricity drawn from the boss's charging station to charge an e-car or e-bike is tax-free. If the vehicle is charged at a public charging station at the employee's expense, the boss can pay tax-free reimbursement of expenses against proof. If the private power connection at home is used to charge the electric car, the employer can replace the amount of electricity actually used. Alternatively, tax-free lump sums can be agreed. If there is additional charging on the company premises, € 30 per month for electric vehicles and € 15 for hybrid cars will be possible from 2021 to the end of 2030. Without a charging facility at the company, the flat rate increases to 70 euros for electric and 35 euros for hybrid vehicles. Somewhat low flat rates apply for 2020 (BMF letter of September 29, 2020, No. 23/24).
If the company provides a charging device at home or reimburses the employee for their own investment costs, this monetary benefit can be compensated at a flat rate of 25 percent wage tax.
Meals, official housing and travel expenses
If employees receive restaurant vouchers, coupons or tokens for the company canteens from their boss, this can be assessed as taxable wages for the tax office. The so-called benefits in kind are decisive. From 2020, the value for a discounted or free meal will be 1.80 euros for breakfast and 3.40 euros for lunch or dinner (BMF letter of December 17, 2019).
Curious: Sausage and jam really make all the difference at breakfast. With the judgment of July 3, 2019 (Az. VI R 36/17), the Federal Fiscal Court made it clear that unoccupied bread rolls and hot drinks provided by the employer every working morning are not breakfast at all - therefore no taxes are incurred. A taxable breakfast must also include the spread or topping such as sausage, jam or cheese.
If the company provides accommodation, the monetary benefit must be taxed - but at moderate flat rates. The value in kind for free accommodation has been nationwide since the beginning of the year EUR 235 per month. However, if an employer gives his employee an apartment at a discount, this benefit no longer counts as a taxable benefit in kind since January 1st. "The prerequisite is that the warm rent paid by the employee is at least two thirds of the rent customary in the area and that this does not correspond to more than 25 euros per square meter," says Uwe Rauhöft from the Bundesverband Lohnsteuerhilfevereine e.V.
Since the beginning of the year, there has been a new meal allowance of eight euros per calendar day for truck drivers who also spend the night on the box. The boss can pay them out tax-free or the employee can claim them as income-related expenses in his tax return.
- Biallo tip: According to a current ruling by the Federal Fiscal Court of August 13, 2020 (Az. VI R 1/17), the warning fees for parking violations paid by their company are not included in the taxable wages of parcel delivery companies.
Laptop, iPad, tablet or smartphone
Anyone who uses their private PC, Internet or telephone connection in the interests of the company can get up to 20 percent of the monthly telephone bill reimbursed for business telephone costs without a lot of paperwork, up to a maximum of 20 euros per month tax-free as a reimbursement of expenses. The tax office will only accept higher cost assumptions against proof.
- Biallo tip: Here you have to keep records of professional computer, telephone and Internet use for a representative period of three months in order to have a verifiable indication of the reimbursable costs.
Smartphone and Co.
Taxes can even be saved with smartphones and tablet PCs - if these devices, including software, belong to the employer, but are also made available for private use. You do not have to pay tax on the monetary benefit. The tax advantage is not only available if you get the device as a salary extra. You also benefit if you have the Christmas bonus paid out by converting your salary in the form of a laptop. If the equipment is transferred to the employee, the employer can tax the benefit in kind with a flat rate of 25 percent.
Even cash grants from the boss for the internet use of his employees can be collected with a flat-rate tax (25 percent). It does not matter whether the employee is on the Internet for business or pleasure. Basic fees for internet access, a flat rate or the cost of setting up internet access can be sponsored.
Gifts, discounts, vouchers & Co.
Personnel discounts in the form of vouchers remain tax-free of up to 1,080 euros per year if the employees are only allowed to use the range manufactured or sold by the company.
- Biallo tip: If you have received a discount from a business partner of your employer and your company has withheld taxes on it, you should claim this money back in your next tax return. You can refer to a judgment of the Cologne Finance Court from October 11, 2018 (Az. 7 K 2053/17). According to the Cologne tax lawyers, such advantages are completely tax-free because the employee does not receive them in return for the work performed.
The boss can also reward personal occasions for celebrations such as birthdays, children’s birth or anniversaries with a gift worth 60 euros tax-free and free of social security contributions.
- Attention: Flowers, wine or a CD are fine and tax-free - but cash is always taxable.
The boss can also reward good performance of his people with bonuses in kind such as movie tickets, gasoline vouchers, wine or books - and the tax office is left out if the benefit in kind does not exceed an exemption limit of 44 euros per month.
According to a current change in the law since the beginning of the year, this continues to apply to the provision of prepaid cards if they are granted in addition to wages and only entitle the holder to purchase goods and services. Caution: "If the prepaid card enables the top-up credit to be paid out in cash at an ATM or a supermarket checkout, or if you can use it to make transfers (for example via PayPal for online purchases), the tax advantage is gone", warns Wolfgang Wawro, tax advisor from Berlin.
- Biallo tip: The Lower Saxony Finance Court ruled on March 13, 2018 (Az. 14 K 204/16) that the employer can even sponsor the annual ticket for a fitness studio over the EUR 44 limit. The judges argue that the benefit accrues to the employee on a monthly basis and must therefore remain tax-free, even if the company takes on the entire annual subscription. However, an appeal is still pending before the Federal Fiscal Court (Az. VI R 14/18).
If you are short of money, you can get a low-interest loan from your employer. The interest advantage over a bank loan remains completely tax and social security free up to a loan of 2,600 euros. In the case of higher loans, the difference between the market interest rate (minus a four percent discount) and the interest actually paid must be taxed. Here, too, the EUR 44 limit may apply and there are no taxes at all.
Who can get the extras?
In principle, all salaried employees - i.e. all dependent full-time and part-time workers, including marginal part-time workers - can receive the tax-free salary supplements. It is important that you explain the advantages of such extras to your employer - because to a large extent these are also those that will benefit him again. His share of the taxes does not apply to a skilful selection of the extras.
It can also make sense to get expert help in this form about a wage increase before the negotiations. That can be the individual preliminary talk with your tax advisor or the professional representative - but the involvement of the works council also helps to assert the tax advantage with the extra - and maybe even with one or the other colleague in a similar situation.
The 450 euro trap
Tax expert Rauhöft from the Bundesverband Lohnsteuerhilfevereine e.V. gives an important note: "For temporary employees, however, it should be noted that an incorrectly applied tax exemption usually results in the social security obligation of the corresponding employer contribution." This means: The wage bonus could lead to a retroactive exceeding of the EUR 450 minimum earnings limit, especially for low-paid employees (mini-jobs), and thus to the elimination of the employment relationship being exempt from insurance.
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