Vacation days are taxed

Attention employers: take advantage of tax-free vacation pay

Vacation pay from the employer: This is possible and is even tax and social security-free. At least if some rules are observed. felix1.de explains which ones they are.

Everyone needs a little more money, especially on vacation. Vacation pay from the boss will probably come in handy for every employee. As an employer, however, you are not allowed to exceed certain limits, otherwise the tax-free vacation pay will turn into wages.

Exemption limits for tax-free vacation pay

As an employer, you are allowed to do so annually 156 euros to your employees in addition to their salary numbers. If your employee is married, the amount increases by 104 euros.
If your employee has children, an additional 52 euros per child is possible. So for a family of four you can pay a total of 364 euros per year.

So that this money can actually be paid tax and social security-free, the Payment within a certain period of time respectively. The employee must be paid the tax-free vacation allowance within 3 months before or 3 months after the vacation leave. Because the vacation pay is there for recreation and may only be paid for recreational purposes.

Flat rate tax

As always in tax law, there is a catch here too. As an employer, you have to pay flat-rate tax on vacation pay. However, that is only 25% and thus considerably less than what would result if you paid your employee this money as wages.

Example: The employee has a monthly salary of 2,500 euros. He is married and has one child.

In tax class 4, the employee has 1,640 euros net. The employer can pay a total of EUR 312 holiday pay, which is then available to the employee tax-free.
The flat rate tax is 78 euros (312 euros x 25%).

If the vacation pay of 312 euros is paid taxable, the employee received 1,800 euros net and thus only 160 euros more net salary. The ancillary costs increase by a total of 212 euros for the employer and employee.

Tax-free vacation pay can also be split over several vacations per year. It is only important that the exemption limit is adhered to for the entire year.

An additional 44 euros per month tax-free

In addition to the tax-free vacation pay, you can give your employee 44 euros a month. You can do this, for example, by contributing to the cost of a job ticket. You can find out how to do this in our blog post "Tax-free job ticket - How to save taxes!"

 

tax consultant

As a former software developer, I combine tax law, IT and project management. I am only satisfied when complicated things have been simplified so much that every child can understand them.

Published by Andreas Reichert

Tax advisor As a former software developer, I combine tax law, IT and project management. I am only satisfied when complicated things have been simplified so much that every child can understand them.