Is the supplementary health insurance tax-free?

The tax treatment of supplementary health insurance is one of its most powerful economic tools. It follows two clearly defined paths, depending on the premium amount.

Option 1: Exemption limit for non-cash benefits under Section 8(2), sentence 11 of the Income Tax Act (EStG)

Bonuses of up to 50 euros per month per employee remain completely exempt from taxes and social security contributions. Prerequisite: The bonus must be a genuine non-cash benefit (the employee cannot have the bonus paid out in cash), and the employer must be the policyholder. Both conditions are automatically met in standard supplementary health insurance plans.

Important: This is a threshold, not a tax-free allowance. If the €50 threshold is exceeded by even a single cent, the entire non-cash benefit is taxable—not just the amount exceeding the threshold. In addition, all non-cash benefits received in a given month are added together, including benefit cards, gas vouchers, and meal vouchers.

Option 2: Flat-rate taxation under Section 37b of the Income Tax Act

For plans with a monthly premium exceeding 50 euros, the employer may pay a flat-rate income tax of 30 percent, plus the solidarity surcharge and church tax. Important: The flat-rate applies only to income tax. The non-cash benefit remains subject to social security contributions for the employer’s own employees. Full net neutrality for employees is achieved only if the employer also pays the social security contributions.

Calculation example: A 60-euro plan costs the employer approximately 950 euros annually under the flat-rate tax system (720 euros in premiums plus about 230 euros in flat-rate tax), plus any social security contributions on the non-cash benefit. A pay raise with a comparable net effect costs the employer significantly more, depending on the specific circumstances.

Social Security

Unlike the non-cash benefit exemption limit, flat-rate taxed supplementary health insurance premiums for a company’s own employees are generally not automatically exempt from social security contributions—the monetary benefit is generally considered part of the remuneration subject to social security contributions. The specific treatment depends on the arrangement and should be clarified on a case-by-case basis with the payroll department or a tax advisor. The most reliable way to ensure exemption from taxes and social security contributions remains the non-cash benefit exemption limit of up to 50 euros.

For employees filing their tax returns

bKV premiums do not appear on the employee’s income tax statement or tax return. The reimbursements the employee receives from the bKV are also tax-free—they are not considered income or special expenses.