of employee benefits
Taxation of lunch, recreational and commuting benefits are different.
Lunch benefit taxation
The employer can offer the lunch benefit as a fringe-benefit or as a meal deduction.
Lunch benefit as a fringe benefit
- Practically same things as a pay raise.
- 25 % of the benefit load is tax deductible for the company. In other words, it’s less expensive for the employer to offer a lunch benefit than to give a pay raise.
- if employee is given a 100 € pay rise, employer needs to pay employer expenses from the whole amount when the actual expenses of the pay rise will be nearly 130 €.
- if the pay rise is given in a form of an employee benefit, the taxable portion is 75 % and employer pays expenses only from 75 €. In addition, the employer doesn’t need to pay employer expenses from the rest 25 € – this whole amount can be deducted in taxation. Also rest 75 € can be deducted at the taxation as other salary expenses.
Lunch benefit as a meal deduction
- Employer pays 25 % of the lunch benefit load and employee 75%
- 25% portion is deductible at taxation
- from 10 € lunch employer is paying 2,50 € and employee 7,50 €
- if employee is given lunch vouchers or lunch load for a card worth of 100 €, then 75 € is deducted from his/her net salary and employer pays a tax-free portion of 25 €. Employer can deduct that 25 € in taxation. Taxable income isn’t generated to employer or employee.
Taxation of sport and cultural (recreational) benefit
- Recreational benefit is a voluntarily benefit provided by the employer and it’s regulated to be tax-free benefit
- Employer can deduct recreational benefit in taxation
- Recreational benefit is tax-free for employees
- Maximum tax-free amount of recreational benefit is €400 per year
- Alternative for pay rise.
Taxation of commuting benefit
- Employer can offer commuting benefit for employee two ways; on top of the salary or included in the salary.
- Commuting benefit doesn’t cause employer non-wage labor costs when it’s 300 € and under or 751 € and over per year per employee. Employer can deduct the purchase expenses in income taxation.
- Benefit is tax-free for employees up to 300 € and between 751€ – 3400 € per year.
- Benefit is taxable for employees between 301 € and 750 € per year.
- Commuting benefit is advantageous for employee, who doesn’t have a right for commuting deductions at yearly taxation when his/her commuting expenses between home and work are under 750 €.
|1-300 €||No non-wage labor costs / expenses are deductible at income tax||Tax free amount|
|301-750 €||Non-wage labor costs / expenses are deductible at income tax||Taxable amount (by own income tax per cent)|
|751-3400 €||No non-wage labor costs / expenses are deductible at income tax||Tax free amount|