Taxation of employee benefits

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:

 

Lunch benefit on top of salary

A lunch benefit on top of salary is like a salary increase. By offering a lunch benefit on top of the salary, the employer can save up to 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 at least 75%.

Example: The employer provides an employee with a lunch benefit of 21 working days a month. The employee pays 21 x (0.75 X 13.50) = € 212.63 of the benefit, which is deducted from the employee’s pay. The employer only pays 25 %, i.e. 21 x (0.25 X 13.50) = € 70.86, for the benefit and can deduct this in taxation.

 

Edenred_Lunch deduction_graph

Sports and culture benefit

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

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.

Commuting benefit

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).

Bike benefit

The bike 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. The bicycle benefit is counted as part of the commuting 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 it is offered (within the maximum amount).

Wellbeing

The wellbeing 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.

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