The law on temporary reduction of the VAT rate on gas supplied through the natural gas grid also introduced the so-called inflation compensation premium.
According to this law, employers have the option in the period from October 26, 2022 to December 31, 2024 to grant benefits in the form of subsidies or benefits in kind to mitigate inflation up to an amount of EUR 3,000 to their employees free of income tax and social security contributions. Employer benefits in excess of this amount are subject to income tax and social security contributions as before.
No particular requirements are placed on the connection between the benefit and the price increase, according to the explanatory memorandum to the law. It is sufficient if the employer, when granting the benefit, makes it clear to the employee in any form (e.g., by making a corresponding reference on the remittance slip as part of payroll accounting) that the benefit is related to the price increase. However, the prerequisite for tax exemption is that the benefit is granted in addition to the salary that is owed anyway, i.e. in particular that it is not financed by the way of deferred compensation.
There is no need for the premium to be made in a one-time amount. It can also be paid in several installments or even monthly. In this respect, possible traps under labor law ("company practice") must be taken into account. The decisive factor is that the payment is made in the beneficiary period up to December 31, 2024 and is limited to a total of EUR 3,000 from the respective employment relationship. In addition, the payment may not replace a benefit already earned, i.e. it may not be paid as a bonus for a past period or instead of a payment already promised for the benefit period. However, in the event of a change of employer, the new employer may pay the amount again in full.
The tax-free benefits must be recorded in the payroll account; however, they are not shown in the payroll tax certificate. The tax-free payment also does not have to be reported in the income tax return. Other tax exemptions, valuation allowances or lump-sum taxation options remain unaffected and may be claimed in addition to the inflation compensation premium listed here.
Unlike the energy price lump sum, there is no legal entitlement to the payment of the inflation compensation premium. If the employer decides to pay this bonus, the so-called principle of equal treatment under labor law must be observed. As a general rule, it prohibits the employer from arbitrarily, i.e. objectively unfounded, circumvention of general or group-related stipulations to the detriment of individual employees.