I. Introduction
In a letter from the Federal Ministry of Finance dated December 7, 2023, the daily values of meals provided free of charge or at a reduced price to employers from the 2024 calendar year were announced. The non-cash remuneration values were set by the 14th Ordinance amending the Social Security Remuneration Ordinance of November 27, 2023.
As a result, the value for meals granted from calendar year 2024 onwards is
a) 4.13 euros for lunch or dinner,
b) 2.17 euros for breakfast.
In the case of full board (breakfast, lunch and dinner), meals are to be valued at 10.43 euros.
We would like to take this publication by the Federal Ministry of Finance as an opportunity to take a fundamental look at the issue of providing free or reduced-price meals and explain its complexity.
II. provision of meals to employees for income tax purposes
Wages within the meaning of the Income Tax Act (Section 8 (1) EStG) include all income in cash or cash equivalents that the employee receives as part of the respective employment relationship. The so-called benefits in kind are benefits from the employer to the employee that are not in cash. These include, for example, the provision of company vehicles, the assumption of costs for clothing or the provision of reduced-price or free meals. This form of remuneration is called a "non-cash benefit". The special features of benefits in kind lie, among other things, in the correct determination of the valuation. This in turn plays a role in the amount of wage tax deduction and social security contributions. In order to be able to determine the non-cash benefit for the provision of meals to employees, the non-cash benefit values are set annually in the Social Security Remuneration Ordinance.
It is important to consider exactly what type of meal provision is involved in each individual case. We would like to give a few brief examples of this.
- Free canteen meal for employees
The employer provides its employees with a free canteen meal every working day.
This benefit to employees is a non-cash benefit subject to income tax and social security contributions, which is to be valued at the official non-cash benefit value of EUR 4.13. This amount is to be added to the gross salary. This amount must be added to the gross salary. Alternatively, the employer can also tax the amount at a flat rate of 25% if the meals are not agreed as part of the salary. This has the advantage that no social insurance is payable on this amount. - Reduced-price canteen meal for employees
The employer provides its employees with a reduced-price canteen meal every working day. The employees can have lunch in the company canteen for e.g. EUR 2.00.
This benefit for employees is a non-cash benefit subject to income tax and social security contributions. EUR 2.13 per meal (difference between the non-cash benefit value and the employee's additional payment) is to be treated as a non-cash benefit. Here, too, there is the option of flat-rate taxation.
Modification: Employees pay EUR 4.50 per lunch in the company canteen.
The additional payment made by employees exceeds the non-cash benefit value (EUR 4.13). In this case, no non-cash benefit is taxable for the employee.
In these cases, a non-cash benefit must be recognized as wages for the employee if the price paid by the employee for a meal is less than the official non-cash benefit value. This generally applies both to company-owned canteens and to canteens not operated by the employer (although the employer subsidizes them).
Meal vouchers or restaurant vouchers are another way of paying employees for meals. This topic is very complex and special regulations must be taken into account. In principle, it is not the meal voucher with the offset value that is to be taken into account as a non-cash benefit, but the relevant non-cash benefit value if the following points are met:
a) A meal is actually provided. Food is only to be recognized as a meal if it is suitable for immediate consumption or is intended for consumption during meal breaks,
b) only one meal voucher is accepted daily for each meal,
c) the settlement value of the meal voucher does not exceed the official non-cash benefit value of a lunch meal by more than EUR 3.10 and
d) the meal voucher is not issued to employees who work away from home.
In order to meet these requirements in full, a large number of details must be checked and consistently implemented and documented. In order to meet requirement b), the employer must, for example, record the days of absence (e.g. due to vacation or illness) for each employee and reclaim the meal vouchers issued for these days.
In addition to providing meals every working day, the employer can also contribute to the cost of meals on special occasions, such as company events or work lunches. Insofar as these are situations that serve the predominant business interest, there is normally no non-cash benefit and therefore no increase in the employer's gross salary.
III Impact on practice
The provision of meals to employees is a complex issue. The individual arrangements have different consequences in terms of wage tax, social security and VAT. For employers, it makes sense to compare the individual concepts in their entirety in order to determine the best possible solution for their own company. We are happy to support you in this process.
If you have any questions or require further information, please do not hesitate to contact us on 02204 9508-100.
