31 January 2023
Employment Tax
Summary
In the following article, you will find the most important changes with regards to employment tax, applicable
as of 2023.
The Detail
Elimination of the so-called “cold progression” – In the past, where salary increases were made to minimize the impact of inflation, it often resulted in a hidden tax increase, since there was no corresponding adjustment of the progressive tax brackets. This additional tax burden will now be counteracted by adjusting the income tax tables to the inflation rate.
Reduction of the accident insurance contribution – The accident insurance contribution has been decreased from 1.2% to 1.1%.
Reduction of the employer’s contribution to the Family Burden Equalisation Fund (=DB) – As of 2025, the DB will be reduced from 3.9% to 3.7%. In addition, a review was undertaken to impose the reduction effective from 2023, provided this is stipulated in a wage-forming regulation (e.g. collective bargaining agreement). According to official information, an internal note documenting that the DB rate for the years 2023 & 2024 will be set at 3.7% also counts as a wage-forming regulation.
Interaction between commuter allowance and public transport ticket – The Tax Amendment Act 2022 brought about a change in the method of calculating the amount of the commuter allowance for those cases in which the employer provides the employee with a public transport ticket free of charge or reimburses a part of the cost of a ticket (weekly, monthly or annual ticket). Firstly, the commuter allowance needs to be calculated as if the employer does not bear any costs. Then the amount granted by the employer needs to be deducted. The employee can then claim the commuter allowance in respect of the remaining amount.
Cost-of-living premium – For the years 2022 and 2023, employers can grant a tax-free cost-of-living premium to their employees. This premium is exempt from all employer and employee taxes. In order to qualify for this treatment, the bonus must be granted due to increased inflation and cannot replace any payment that would, under “ordinary” circumstances, be granted anyway. If these conditions are met, a maximum of € 2,000 per year can be paid tax-free. If further conditions are met, the tax-free amount can be expanded by a further € 1,000 per year.
Tax-free employer subsidies for CO 2 emission-free / electric vehicles – If the employer subsidises the non-work related use of emission-free / electric vehicles within the framework of a car sharing programme, the subsidy can be granted tax-free up to a maximum of € 200 per year. The payment needs to be made directly to the car sharing provider or granted to the employee as a voucher.
Reimbursing charging costs for employer-owned CO 2 emission-free / electric vehicles
• Charging of an employer-owned vehicle at the employer’s premises does not constitute a taxable benefit in kind.
• The reimbursement of vouched costs by the employer for charging an employer-owned vehicle at public stations or directly bearing the costs (e.g. fuel card for emission-free cars) by the employer does not lead to a taxable benefit in kind.
• If the employer-owned vehicle is charged at the employee’s home and the employer reimburses these costs, a distinction must be made:
1. If it is technically possible to quantify the amount the vehicle has been charged: Then, the charged quantity (kWh) is to be multiplied by the official electricity price (published annually, for 2023: 22,247 Cent/kWh). This value can be reimbursed tax-free.
2. If it is not possible to quantify the amount the vehicle has been charged: For 2023-2025, a lump sum of € 30 per month can be reimbursed tax-free for this purpose.
Wallbox at the employee’s home – Should the employee be in possession of an employer-owned emission-free vehicle and should the employer bear or reimburse the costs for the acquisition of a Wallbox / charging station (at the employee’s home), up to an amount of € 2,000 can be reimbursed without incurring a taxable benefit in kind. The exceeding amount is taxable.
Charging an employee-owned CO 2 emission free vehicle at the employer’s premises does not constitute a taxable benefit in kind.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners ("Vialto") refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
© 2023 Vialto Partners. All Rights Reserved.