Two-for-One with Tax-Free Gifts for Employees in Germany

tax-free gifts for employees

Small gifts maintain friendships and contribute to good relations between the giver and the receiver. That doesn’t only apply to personal life, but also to work life. With the right gifts, employers show their employees that they’re valued and appreciated. But it’s important for employers and employees to keep these gifts tax-free and make sure employees don’t have to pay tax contributions for them. The German government has put together a specific framework for this.


What are employee gifts and why are they worth the investment?

Employee gifts are contributions that employers make in addition to a regular salary. By respecting certain limits, companies can target the entire workforce or individual employees. Whether for personal occasions, company anniversaries, or holidays — employee gifts express appreciation and recognition and make a valuable contribution to the well-being of the workforce and a positive working atmosphere. Well-chosen gifts promote employee motivation and satisfaction and also contribute to company loyalty.

To keep employee gifts tax-free, companies have to treat them as an addition to the regular salary in the form of a non-cash benefit. Within certain limits, non-cash benefits remain tax-free for employers and employees. Cash gifts, on the other hand, are taxed just like the regular salary for both employers and employees. 

An employee is happy about her christmas gift


What gifts are popular with employees?

It’s important to consider the options carefully to find employee gifts that really contribute to positive and appreciative relationships within a company. Employees should enjoy the gifts and benefit from the non-cash benefits in their everyday life. The best options are high-quality products or gift certificates with which the company can meet the needs and wishes of their employees.


Popular employee gifts: 


Gift certificates

Gift certificates can be direct non-cash benefits from the company, such as subsidized purchases or gift certificates from partners. Examples are gift certificates for gas or food or rechargeable gift cards that can be used at specified retailers. To keep these non-cash benefits tax-free, they shouldn’t go above €44 per month, and it shouldn’t be possible to exchange a gift certificate for cash.


Health-related gifts

Health-related gifts have become increasingly popular among employees. Some of the classic options are subsidies for a gym membership or a company bike. Other contributions that benefit mental fitness and personal development are highly valued by employees. An especially lasting and entertaining option is learning a new language. With digital language courses, such as Babbel for Business, employees can flexibly and individually learn a language of their choice. This new knowledge is a benefit at work and in personal life because language learning promotes communication skills and intercultural understanding at the same time.


Practical gifts for the home, kitchen, and office

Practical gifts for home and office are also appreciated. For a company it’s recommended to develop a theme that most employees are interested in. High-quality kitchen appliances, high-end writing utensils, exclusive phone cases and accessories, drinking containers for the office and to-go, and also stress balls for active relaxation at work are examples of well-received practical gifts.


Company parties

Company and holiday parties are a highlight for many employees. As a gift for employees they remain tax-free as long as the employer contribution doesn’t exceed €110 per person. That doesn’t include the tax-free contribution of €44 per month, which can still be given in addition.


What are the benefits for employers? 

Employee gifts increase a company’s appeal as an employer. Non-cash benefits motivate your employees and reward them for good work and dedication at the same time.

Employees gifts are particularly important in times of crisis — the token of appreciation brings employees closer together and helps the entire company make it through uncertain times. The German government has reacted to the current situation by giving companies the opportunity to award a tax-free “Corona-Bonus” of up to €1500 to their employees. Additional subsidies to the reduced hours compensation (Kurzarbeitergeld) are also tax-free up to 80% of the regular pre-tax salary.


What should you look out for with tax-free gifts for employees?

To keep employee gifts tax-free, there are a few rules to follow:

  • Cash gifts are taxable.
  • Non-cash benefits (gift certificates, subsidies, etc.) are tax-free if they don’t surpass the monthly limit of €44. This limit applies to all company benefits.
  • Gifts for personal occasions — such as company anniversaries, birthdays, weddings, the birth of a child, among others — are tax-free up to €60 per month. If more than one occasion takes place in a month, the additional gifts are also tax-free.

Give and get with tax-free gifts for employees

Companies should absolutely avail themselves of the tax advantages of non-cash benefits. They promote employee motivation and cohesion and show them that their individual contribution is important, especially in times of crisis, and is valued by their employer. At the same time, gifts for employees help limit a company’s salary costs because they are an effective alternative or complement to salary raises.

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