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Taxation of employee benefits

Hello employer, read here how you offer employee benefits tax-free with targeted payment methods.

Hello employer, read here how you offer employee benefits tax-free with targeted payment methods.

How does the taxation of employee benefits work?

Edenred's operation is based on providing targeted payment instruments for employee benefits. This enables the tax exemption of fringe benefits and staff benefits that are distributed (under certain benefit-specific conditions).

Lunch benefit

The lunch benefit (i.e. meal benefit) has been defined by the Tax Administration as 25% tax-free.

The benefit is loaded to employees' benefit accounts on a monthly basis. The amount to be loaded varies according to the number of monthly working days of each employee. The lunch benefit is working day-specific and intended to be used once a day. The Tax Administration determines the daily minimum and maximum payment limits for the benefit

The benefit can be offered to employees as a fringe benefit or as a lunch deduction:

 

Fringe benefit

A fringe benefit is like a salary increase. By offering a lunch benefit on top of the salary, the employer saves 25%.

Example: If an employee is given a salary increase of €100 in cash, the employer must pay employer contributions for the entire amount. In this case, the actual costs of the salary increase will rise.

If the salary increase is instead offered as a lunch benefit balance worth €100, the taxable portion is 75%, i.e. employer contributions are paid only for €75. The remaining €25 is deducted as such in taxation, and the taxable portion (€75) is an expense that can be compared to salary expenses.

 

Edenred_Lunch_fringe_benefit_graph

Lunch deduction

The lunch deduction is charged to the employee's salary. 25% of the lunch benefit is tax deductible, so the employee pays the remaining 75%.

Example: If an employee receives €100 of lunch benefit balance per month, €75 is deducted from their net salary. The employer remains to pay the tax-free part of the benefit (€25), which can be deducted as such in taxation. The benefit does not generate taxable income for the employee or the employer.

 

Edenred_Lunch deduction_graph

Sports and culture benefit

The sport and culture benefit is a well-being-promoting alternative to a salary increase. It is a tax-free employee benefit that the employer can deduct from taxation. The benefit is tax-free for the employee.

The sports and culture benefit is a well-being-promoting alternative to a salary increase, and a maximum annual tax-free amount has been defined for it. This staff benefit is tax-free for the employee and tax-deductible for the employer.

The benefit must be offered to the staff collectively. However, the employer can determine how much benefit is offered (within the maximum amount) and whether it includes a possible deductible

Commuting benefit

The commuting benefit is an employment benefit offered in the same way as a salary increase. It is a tax-free employee benefit that the employer can deduct from taxation. The benefit is tax-free for the employee.

A commuting benefit is an employee benefit offered in the same way as a salary increase, for which a maximum annual tax-free amount has been defined (which includes a possible bicycle benefit). This fringe benefit is tax-free for the employee and tax-deductible for the employer.

The benefit does not have to be offered to the staff collectively and the employer can determine how much the benefit is offered (within the maximum amount).

Massage benefit

The massage benefit is a staff benefit offered in the same way as a salary increase, which must be distributed collectively, normally, and reasonably. The benefit is tax-free for the employee and tax-deductible for the employer. Check the annual maximum tax-free amount of Edenred's massage benefit

The benefit's tax exemption also requires that the employer has determined in advance the places where the targeted payment method of the massage benefit can be used. Edenred enables this through a separate tool.

The employer can determine how much benefit is offered (within the maximum amount) and whether it includes a potential deductible.

Dental benefit

The dental benefit is a staff benefit offered in the same way as a salary increase, which must be distributed collectively, conventionally, and reasonably. The benefit is tax-free for the employee and tax-deductible for the employer. Check the annual maximum tax-free amount of Edenred's dental benefit

The benefit's tax exemption requires that the benefit is organized by the employer and is agreed upon in an occupational health care agreement, bylaw or other similar documents. In addition, the employer must determine in advance the places where the targeted payment instrument can be used. Edenred enables this through a separate tool.

Regular dental care can be considered dental care that is part of maintaining work ability and treating illness. Dental treatment other than health or illness treatment is a fully taxable benefit for the employee (e.g. aesthetic dental treatment).

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