A fringe benefit (German: "geldwerter Vorteil") is a non-cash benefit that employers provide in addition to salary – such as a company car, meal allowances, or vouchers. In principle, fringe benefits are subject to income tax and social security contributions in Germany. However, there are tax-free thresholds (50 euros per month) and allowances (1,080 euros per year as a discount allowance) that enable tax-free provision.
What Is a Fringe Benefit (Geldwerter Vorteil)?
A fringe benefit (also called "Sachbezug" or non-cash benefit) refers to all income that employees receive not as money but in the form of goods or services. According to Section 8 of the German Income Tax Act (Einkommensteuergesetz, EStG), these benefits count as taxable wages.
The key difference from regular salary: Fringe benefits are not paid out in cash. Instead, the employer provides goods or services free of charge or at a reduced price. The value of this benefit equals the amount employees would have to spend if they financed the benefit themselves.
For HR professionals, fringe benefits are an important tool for employee retention. When used correctly, both parties benefit: Employers can offer attractive perks without bearing the full payroll costs of a salary increase. Employees receive real added value that, depending on the structure, may even be tax-free.
Examples of Fringe Benefits
The range of possible non-cash benefits is wide. Here are the most common fringe benefits in practice:
Company Car
A company car that may also be used privately is the classic fringe benefit. Private use must be taxed – either via the 1-percent rule or through a logbook. Special reduced tax rates apply to electric vehicles.
Non-Cash Benefits up to 50 Euros (Tax-Free Threshold)
Vouchers, fuel cards, job tickets, or gym memberships can be granted tax-free and exempt from social security contributions up to a threshold of 50 euros per month. Important: If the threshold is exceeded by even one cent, the entire amount becomes taxable.
Meal Allowances and Meals
Subsidies for lunch in the canteen or through meal vouchers are a popular fringe benefit. For 2025, official benefit values apply: 4.40 euros for lunch or dinner and 2.30 euros for breakfast. Employers can add an additional 3.10 euros tax-free – resulting in a maximum meal voucher of 7.50 euros per meal.
Other Tax-Free or Tax-Advantaged Benefits
There are numerous other options for fringe benefits:
- Job ticket: Subsidies for public transportation can be completely tax-free (Section 3 No. 15 EStG)
- Childcare: Subsidies for the care of pre-school children are tax-free
- Company IT equipment: Laptops, smartphones, or tablets for private use (if flat-rate taxed or as a loan)
- Health promotion: Up to 600 euros per year for company health measures
- Employee shares: Annual allowance of 2,000 euros for equity participation
- Discounts on company products: Staff discount up to the discount allowance of 1,080 euros per year
How to Tax Fringe Benefits
As a general rule: Fringe benefits are subject to income tax and social security contributions and are added to gross wages. Taxation is processed through payroll – the employer deducts wage tax.
Tax-Free Threshold vs. Allowance: The Important Difference
Two terms regularly cause confusion – yet the distinction is crucial:
Tax-free threshold (e.g., 50 euros per month for non-cash benefits): With a tax-free threshold, it's all or nothing. If the benefit stays below 50 euros, it's completely tax-free. If the threshold is exceeded, the entire amount becomes taxable – not just the excess.
Allowance (e.g., 1,080 euros discount allowance per year): With an allowance, the base amount always remains tax-free. Only the excess amount is taxed. So if an employee receives staff discounts worth 1,500 euros, only 420 euros (1,500 – 1,080) are taxable.
Flat-Rate Taxation by the Employer
As an alternative to individual taxation, the employer can apply flat-rate taxation to certain fringe benefits. The tax rate is typically 25 percent (Section 37b EStG). The advantage for employees: They receive the benefit practically gross for net, as the employer covers the tax.
Flat-rate taxation is particularly useful for:
- Gifts for personal occasions (up to 60 euros per occasion)
- Meal subsidies
- Benefits at company events
Official Benefit Values 2025 at a Glance
The official benefit values are set annually by the Social Security Remuneration Ordinance (Sozialversicherungsentgeltverordnung, SvEV) and adjusted to consumer prices. The following values apply for 2025:
These values form the basis for correct calculation and taxation of non-cash benefits in payroll processing.
Company Car as Fringe Benefit: How to Calculate It
The company car is the most common and often most complex fringe benefit. There are two methods for calculation:
1-Percent Rule
The flat-rate method is the simplest option: Each month, 1 percent of the gross list price is taxed as a fringe benefit. Additionally, 0.03 percent of the gross list price is added per kilometer of distance between home and workplace.
Example: Company car with combustion engine
- Gross list price: 45,000 euros
- Distance home–work: 20 km
- Calculation:
- 1% of 45,000 euros = 450 euros
- Commute to work: 0.03% × 45,000 euros × 20 km = 270 euros
- Fringe benefit: 720 euros per month
Special Rules for Electric and Hybrid Vehicles
Significantly more favorable tax rates apply to electric vehicles:
- Pure EVs up to 70,000 euros gross list price: Only 0.25 percent (instead of 1 percent)
- EVs over 70,000 euros: 0.5 percent
- Plug-in hybrids: 0.5 percent (if at least 80 km electric range or max. 50 g CO₂/km)
Example: Electric company car
- Gross list price: 50,000 euros (under 70,000 euros)
- Distance home–work: 20 km
- Calculation:
- 0.25% of 50,000 euros = 125 euros
- Commute to work: 0.0075% × 50,000 euros × 20 km = 75 euros
- Fringe benefit: 200 euros per month
Logbook as an Alternative
As an alternative to flat-rate taxation, employees can keep a logbook. This method divides the actual costs of the vehicle proportionally between private and business use. This approach is particularly worthwhile when the vehicle is primarily used for business purposes.
Frequently Asked Questions About Fringe Benefits
What is a fringe benefit (geldwerter Vorteil)?
A fringe benefit is a non-cash benefit that the employer provides in addition to salary. It is not paid out in cash but provided in the form of goods or services. Typical examples include company cars, vouchers, or meal subsidies. The value equals the amount employees would pay if they financed it themselves.
How are fringe benefits taxed in Germany?
Fringe benefits are generally subject to income tax and social security contributions. They are added to gross wages and taxed through payroll. The employer deducts wage tax. Within certain tax-free thresholds and allowances, non-cash benefits can remain tax-free.
What is the difference between a tax-free threshold and an allowance?
With a tax-free threshold (e.g., 50 euros for non-cash benefits), the entire amount becomes taxable once exceeded. With an allowance (e.g., 1,080 euros discount allowance), only the excess is taxed – the base amount always remains tax-free.
What is the non-cash benefit threshold for 2025?
The monthly tax-free threshold for non-cash benefits is 50 euros per employee. This threshold has been in effect since January 2022 and remains unchanged for 2025. Non-cash benefits up to this value are exempt from tax and social security contributions.
Which fringe benefits are completely tax-free?
The following benefits can be granted tax-free under certain conditions: non-cash benefits up to 50 euros monthly, job tickets for public transport, childcare subsidies (pre-school children), company health promotion up to 600 euros annually, and private use of company IT equipment.
How is the fringe benefit for a company car calculated?
Under the 1-percent rule, the monthly fringe benefit is 1 percent of the gross list price. For commutes between home and workplace, 0.03 percent per kilometer of distance is added. For electric vehicles up to 70,000 euros, only a quarter of this rate applies (0.25 percent).
Can mini-jobbers also receive fringe benefits?
Yes, mini-jobbers and part-time employees can also receive fringe benefits. The same thresholds apply. However, caution is advised: Non-cash benefits count toward wages and can jeopardize the 538-euro limit for mini-jobs.
Do I need to declare fringe benefits in my tax return?
Generally not, if taxation has already been processed through payroll. The employer deducts wage tax. Only in exceptional cases – such as subsequent taxation – may a declaration in the tax return be required.
Conclusion
Fringe benefits are an effective tool for HR professionals to offer employees attractive perks – often with tax advantages for both parties. The key lies in correct application: The monthly tax-free threshold of 50 euros, the discount allowance of 1,080 euros, and special rules for company cars offer numerous design options.
Proper documentation and correct accounting are essential. Since tax regulations are complex and benefit values change annually, coordination with a tax advisor is recommended when introducing new benefits.
Want to discover more HR knowledge? In the Aivy Lexicon you'll find more articles about recruiting, employee retention, and modern HR management.
Disclaimer: This article is for general information purposes only and does not constitute individual tax advice. For specific questions about the tax treatment of fringe benefits in Germany, please consult a tax advisor.
Sources
- Section 8 German Income Tax Act (Einkommensteuergesetz, EStG). Federal Ministry of Justice, 2025. https://www.gesetze-im-internet.de/estg/__8.html
- Social Security Remuneration Ordinance (Sozialversicherungsentgeltverordnung, SvEV). Federal Ministry of Labour and Social Affairs, 2025. https://www.gesetze-im-internet.de/svev/
- Federal Ministry of Finance Letter: Distinction between cash payments and non-cash benefits. Federal Ministry of Finance, 2024. https://lsth.bundesfinanzministerium.de/lsth/2025/B-Anhaenge/Anhang-24/VII/anhang-24-VII.html
- Wage Tax Guidelines (Lohnsteuer-Richtlinien, LStR) R 8.1 – Valuation of non-cash benefits. Federal Ministry of Finance, 2024.
- Official Benefit Values 2025 – Overview. Lexware, 2025. https://www.lexware.de/wissen/mitarbeiter-gehalt/sachbezugswerte-2025-diese-grenzen-gelten-aktuell/
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