Payroll & Taxation
Benefits in Kind for Employees: When They Are Taxed and When They Are Not
Published · 6 min read · NS Accounting & Tax Office
Written by the NSTAX team of accountants and tax advisers
Company phone, car, private health insurance, meal vouchers — more and more businesses offer such benefits to their staff on top of the basic salary. What many employers do not know is that most of these benefits are subject to specific tax rules, and handling them incorrectly can create an additional tax burden for the employee as well as a risk of penalties for the business. In this article, NSTAX explains in detail how the most common benefits in kind are treated for tax purposes.
The General €300 Rule
Under the Income Tax Code, any benefits in kind received by an employee or a relative are included in their taxable income from employment, provided their total value exceeds €300 per tax year. If the total value stays below this threshold, the benefits do not create a tax burden for the employee. The threshold applies to all benefits combined, not separately to each benefit.
Company Car: The Most Complex Case
Providing a company car to an employee or executive constitutes a benefit in kind, even if it is used mainly for business purposes, where the employee’s position entails such provision. The taxable value is calculated on a sliding scale based on the vehicle’s Retail Price Before Taxes (RPBT):
- Up to €14,000 RPBT: 4% of the value
- From €14,001 to €20,000: 20% of the value
- From €20,001 to €25,000: 18% of the value
- Over €25,000: 22% of the value
If the vehicle is also used for private journeys, the private-use percentage is applied proportionally to the total taxable value.
Company Phone and Laptop
A company mobile phone is considered a work tool when used for business purposes (e.g. communication, email), but the value of the device and related expenses may be considered a benefit in kind where there is also significant personal use, usually calculated as a percentage of the device’s annual depreciation or rental.
Private Health Insurance: A Special, Favourable Regime
Private health and life insurance offered by the employer to the employee enjoys more specific, more favourable tax treatment compared with other benefits, subject to conditions relating mainly to the amount of the premium. This makes it one of the most efficient benefits for both employer and employee, compared with an equivalent pay rise that would be fully taxed.
Benefits Fully Exempt from Taxation
The law provides explicit exemptions where the €300 threshold does not even apply:
- Stock option rights
- Provision of housing to an employee, subject to conditions
- Loans to an employee, provided the required formalities of a written agreement are observed
- The childbirth allowance, for which the business is fully exempt from tax on the corresponding amount
A Calculation Example
Suppose an employee has a company car with an RPBT of €20,000, which they use 50% for private journeys. The total taxable value of the provision is 20% of €20,000, i.e. €4,000 per year. Because 50% of this use is private, the corresponding percentage is taxed, i.e. €2,000, which is added to the employee’s taxable income from employment.
If the same employee also receives a company phone with an annual use value of €240, the total benefits in kind (€2,000 + €240 = €2,240) far exceed the €300 threshold, so the whole amount is taxed normally as employment income, with corresponding tax withholding.
4 Practical Tips for Employers
- Systematically record all benefits in kind per employee, so you know whether they cumulatively exceed the €300 threshold
- Document the percentage of business versus private use of company vehicles and devices, so the calculation is accurate
- Consider private health insurance as an alternative to a pay rise, due to its more favourable tax treatment
- Remember to correctly report all benefits in kind above €300 on the employee’s annual earnings certificate, to avoid penalties for an inaccurate return
Frequently Asked Questions
Is a company phone used only for work taxed?
What if an employee’s benefits are below €300 per year?
How is the taxable value of a company car calculated?
Is private health insurance tax-free?
Is a special procedure needed for a loan to an employee?
Planning Benefits in Kind for Your Staff?
NSTAX, an accounting and tax advisory firm in Athens, designs and properly monitors your business’s benefits in kind, so you can make use of the available tax advantages without risk in an audit. Contact us for an initial assessment.
See also NSTAX services for businesses.
Tax rates and the conditions for exempting benefits in kind may change under newer legislation. The example is indicative. For an accurate picture of your own business, contact us.