Gift Certificates and Non-Cash Benefits: Some Changes in 2022

In addition to their wages, employers can provide their employees with non-cash benefits. These include, for example, gift cards, prepaid cards, or gas cards. These non-cash benefits are tax-free up to a certain limit, provided certain criteria are met. Some of these criteria will change in 2022. Your tax advisor in Düsseldorf and Oberhausen explains what you need to keep in mind.

The tax-free limit for non-cash benefits will be raised to 50 euros per month in 2022. Previously, it was 44 euros per month. That’s the good news. Elsewhere, things get more complicated: A form of non-cash benefit that was previously tolerated will no longer be accepted for tax purposes. Prepaid cards known as open-loop cards will no longer be accepted by the tax authorities effective immediately. These are prepaid cards that can be used without restriction. Starting January 1, it will be particularly important to clearly define what vouchers and prepaid cards can be used for.

Definition of a non-cash benefit

If goods or services can be purchased with a voucher or a prepaid card, this constitutes a non-cash benefit. Additionally, certain criteria of the Payment Services Supervision Act (ZAG) must be met; otherwise, the voucher or prepaid card is considered cash wages. The change in 2022 affects the definition of the term “cash benefits” in the Income Tax Act and also entails an amendment to the Payment Services Supervision Act. Accordingly, vouchers and gift cards are tax-advantaged only if they meet two requirements.

• They may only be used to purchase goods and services
• They may only be redeemable to a limited extent

Cash cards and vouchers that qualify as non-cash benefits

Various factors relate to the criterion of “limited redeemability.” Issued gift cards or prepaid cards that are valid within a limited regional area meet this criterion. This includes, for example, city cards or shopping center gift cards, provided the accepting merchant is located within the country. "Limited redeemability" also means that specific providers with a limited product range are eligible. This refers, for example, to fuel cards from a gas station chain. It also includes fitness vouchers from a gym, movie theater vouchers from a theater operator, or rechargeable gift cards from a retailer.

This also includes gift cards for goods and services that can only be redeemed at specific acceptance points. This is the case when the card issuer has entered into an acceptance agreement. For example, if an employer enters into a contract with a specific local gas station, an acceptance agreement is created. It is important to note that this criterion applies only if the vouchers relate to specific tax or social purposes within the country. This includes meal vouchers or treatment cards for rehabilitation measures as well as medical services.

Things get complicated when it comes to vouchers for an online retailer. These are classified as non-cash compensation only if employees can purchase goods or services from the online retailer’s product range. If products from a third-party provider are also offered on the same platform, the voucher is considered cash compensation. Vouchers for streaming services are considered non-cash compensation if they can only be used for movies and music.

Cash benefits no longer recognized

Starting January 1, 2022, certain monetary benefits will no longer be recognized as non-cash benefits. This may be the case for payments that authorize employees to obtain goods or specific services owed to them. From now on, retroactive reimbursement of expenses will also no longer be recognized. For example, employees can no longer pay for gas receipts themselves first and then have them reimbursed by the employer.

For tax purposes, gift cards and prepaid cards are only recognized as tax-advantaged non-cash benefits if the credit balance cannot be withdrawn in cash. The prepaid card must not have an IBAN, must not allow for bank transfers, and must not be considered a general payment instrument.

Any type of fee that employers must pay, for example, to load the voucher or cash card, does not constitute a monetary benefit. Employers must pay these fees; they are not included in the employee’s wages.

Tax Advisors in Düsseldorf and Oberhausen

Do you have a question or concern regarding the tax law governing non-cash benefits? The team at Trimborn . Partner can assist you as quickly as possible with our many years of experience and professional expertise. Are you looking for a tax advisor? Then contact us. At our offices in Düsseldorf and Oberhausen, we are happy to assist you with all your tax-related matters.