Subject Reference Card

The non-cash benefit card is a prepaid card that employers use to provide non-cash benefits—it can be used at select participating merchants and cannot be cashed out. It is particularly relevant to the supplementary health insurance (bKV) because both are subject to the same exemption limit.

The Conflict Over the 50-Euro Exemption Threshold

The exemption limit under § 8(2), sentence 11, of the Income Tax Act (EStG) applies to the total of all non-cash benefits received by an employee in a given month—not to each benefit individually.

Here’s an example: A gift card worth 50 euros already maxes out the limit. If you add a supplementary health insurance plan with a monthly premium of 30 euros, the total comes to 80 euros—which exceeds the limit for both benefits. It’s not the 30 euros that’s taxable, but the full 80.

This is the most common situation in which a supplementary health insurance plan unexpectedly becomes taxable: not because of the plan's coverage amount, but because of a benefit that is already in effect.

What this means for planning

Before implementing a supplementary health insurance plan, an assessment of all current non-cash benefits must be conducted. If a conflict arises, there are three options:

• Reduce the value of the in-kind benefit so that the combined value of both benefits remains below the limit
• Tax one of the two benefits at a flat rate and reserve the tax-free allowance for the other
• Choose a plan with a lower premium, provided that the scope of coverage allows it

Which option is more cost-effective depends on the amounts involved and the number of employees—and needs to be calculated, not estimated.

The Difference in Effect

Both benefits are non-cash benefits, but they have different effects. The non-cash benefit card can be used immediately and flexibly, but it quickly becomes a matter-of-course part of one’s salary. The supplementary health insurance (bKV) comes into play in specific situations of need and is perceived more as a gift—provided it is actually used.

Anyone who has to weigh the pros and cons of the two options should therefore consider not only the tax implications but also what effect they actually want to achieve.

What to Look Out For

• What non-cash benefits are currently being provided —and in what amounts?
• Do individual employees utilize the limit differently than the average?
• Is a service exempt from tax on its own, and therefore does it not count toward the exemption limit?
• Who regularly checks to see if the total remains below the limit—for example, after a premium adjustment?

Conclusion

The non-cash compensation card is not in direct competition with the bKV, but it is a factor that must be taken into account. Anyone who ignores it risks having a carefully planned bKV plan derailed by a benefit that has been in place for some time—and that both benefits will be subject to tax together.

This article provides a general overview and is not a substitute for tax advice in specific cases.