Tax- and contribution-free "inflation compensation premium" of up to €3,000 introduced
January 10, 2023
To mitigate the consequences of the sharp rise in prices, the legislature has created the possibility for employers to pay their employees a tax- and contribution-free “inflation compensation premium” of up to €3,000. This is subject to the following conditions:
- Beneficiary period: tax-free benefits are paid in the period from 26.10.2022 to 31.12.2024. The tax exemption of max. €3,000 per employment relationship applies across all years. It is therefore irrelevant whether the employer provides his benefit in this period in one amount or distributed in several payments. If several employment relationships exist in the benefit period, then - according to the current view - the bonus can be claimed several times (up to €3,000 per employment relationship). For the employer, this constitutes a tax-deductible operating expense.
- Additionality requirement: In principle, the use of the tax allowance is voluntary for employers. If necessary, such an “inflation compensation premium” can be agreed by collective bargaining. The tax exemption only applies to employer benefits that are provided in addition to the wages owed anyway. Tax exemption is therefore excluded, for example, in the case of salary conversion or compensation for accumulated overtime. However, it is possible, for example, to pay out a voluntary Christmas bonus as a tax-free “inflation compensation bonus”.
- Employer benefits: For the purpose of claiming the new tax exemption, it is irrelevant whether the employer benefit is paid in the form of cash wages or a non-cash benefit. It is therefore also possible to use the tax exemption by issuing vouchers, e.g. for refueling. The tax exemption does not trigger consumption of the €50 allowance; this is applicable in addition to the tax-free inflation compensation bonus.
- Tax-free amount: A tax-free amount of €3,000 is standardized. This is independent of the industry. As this is an allowance, only the amount in excess of €3,000 is taxable in the case of higher benefits.
- Employer-related inflation compensation bonus: The tax exemption applies to all employees in the tax sense, including, for example, managing directors and mini-jobbers. However, it does not apply to freelancers, for example, who are not classified as employees. In the case of family-related employment relationships, however, it is necessary to check whether the inflation compensation premium corresponds to the agreement between strangers. This is particularly the case if the bonus is also granted to employees who are not family members.
- Proof of purpose: No special requirements are placed on the connection between the benefit and the price increase. According to the explanatory memorandum to the law, it is sufficient if the employer makes it clear in any form (e.g., by making a corresponding reference on the remittance slip as part of payroll accounting) that the benefit is related to the price increase when it is granted.
- Obligation to keep records: The tax-free benefits must be recorded in the payroll account.
Recommended action: This now created option of granting tax- and duty-free fringe benefits to employees can be put to good use in practice in many cases. The possibilities should be examined on an individual basis.