Tax Effecient ways to Increase Your Salary in Germany

Are you tired of feeling intimidated when it comes to asking for an Increase Your Salary in Germany? Fear not! What if I told you that it’s possible to boost your income in Germany without having to ask for more money?

That’s right, you can improve your financial situation by focusing on other areas instead. In this article, I’ll reveal some insider tips on how you can increase your worth and ultimately, your paycheck. So say goodbye to the awkward salary negotiation conversations and hello to a brighter, more rewarding future. Let’s get started!

Its a win Win Situation

Benefits in Kind

Lets start with benefits in kind it’s a win-win situation for both you and your boss.

Instead of giving you part of your salary as a monetary payment, your employer can provide you with a product or service as a gift. This could mean restaurant vouchers, gift cards, tickets to sporting events, or even subsidies towards gym memberships. And as of 2022, up to 50 euros per month are tax and social contribution-free – that’s an increase from the previous limit of 44 euros.

Get Voucher Cards tax-free

Your boss can also give you voucher cards, but not all voucher cards are tax-free. A new law that started in 2020 divides benefits into tax-free gifts and taxable cash. Cards that are specific to certain stores, like rechargeable gift cards, and vouchers for shopping centers and city cards that can only be used in certain stores, are tax-free.

But, there are limitations to these tax-free benefits. For instance, they must not be considered payment services and must not have a cash payment function. Plus, they should only allow the holder to buy goods and services.

Maximum Limit for Tax-Free Vouchers

It’s also essential to remember that the employer must provide the tax-free voucher cards on top of the wages they already owe. That’s the only way it will be tax and contribution-free. Additionally, the exemption limit is 50 euros per month, and all in-kind donations of this kind are combined. If the employer exceeds this limit, they must pay income tax and social security for the entire benefit.

Yet, if the company produces or sells goods or services themselves, there’s a personal discount allowance of up to EUR 1,080 per year. Up till this amount, neither income tax nor social security will be due.

Related Guide: Things you Must Know BEFORE signing a Job Contract in Germany

Who Doesn’t Like Gifts?

Tax Free Gifts to Increase your Salary in Germany

Did you know that there are specific rules that apply when your boss gives you a gift? According to tax law, gifts like flowers, books, wine, and CDs can be given to you with a higher exemption limit of 60 euros gross, but only if there’s a personal reason like a birthday, employee anniversary, wedding, promotion, or returning from parental leave. And guess what? This exemption limit for courtesy applies to events and can be used also to the monthly limit of 50 euros for other gifts!

Free Gym Membership for Employees in Germany

But wait, there’s more! Are you interested in getting fit and healthy? Your boss can help you with that and even give you tax-free benefits! By supporting your gym membership or paying for certified health courses, your employer can give you a tax-free salary extra. And starting from 2022, the monthly contribution to your gym membership can now go up to 50 euros. You can also take advantage of health courses up to 600 euros per year per employee, tax-free!

But here’s the catch: if your boss credits the subsidy to your salary or converts your wages, the tax exemption no longer applies. So, if you want to enjoy these tax-free salary extras, make sure to check out the Prevention Guide by the Central Association of Health Insurance Funds here.

Public transport

Get Transportation cost as Salary Addition in Germany

Since 2019, employers can provide their employees with a tax-free subsidy for public transportation between their home and their first place of work. This includes various types of tickets, such as single tickets, multi-journey tickets, season tickets, and even discount cards like the Bahncard 25 or 50.

Job ticket as a suplement to salary in Germany

But that’s not all – job tickets are also tax and contribution-free if granted besides to the salary. And thanks to the 2019 Annual Tax Act, employers can now pay a flat rate of only 25% wage tax for job tickets, which can result in lower social security contributions and less income tax for employees who contribute financially.

If you’re a frequent business traveler, you can even ask your employer to sponsor a Bahncard for you. With a Bahncard 25 or 50, you’ll get a 25% or 50% reduction in fares, respectively. And with a Bahncard 100, you can enjoy free travel on the entire Deutsche Bahn network for an entire year! And the best part? If the price reductions you get during the validity period exceed the sale price of the Bahncard, then the sponsorship remains tax-free.

Related Guide: How to Submit a Tax Return in Germany

Healthy transport

Free Bicycle from boss in Germany

Did you know that service bikes are also tax-deductible? Employers can provide their employees with company bikes tax-free until the end of 2030. And here’s another perk – employees can charge their electric car or e-bike at their employer’s premises without it being taxed as income.

Plus, if you use your personal car to commute to work, your boss can pay you 30 cents per kilometer tax-free for the journey from home to work If your boss pays the 15 percent wage tax on it , then you pay neither taxes nor social security contributions on it.

Work Life Balance

Childcare costs with Salary in Germany

your employer can lend you a helping hand with childcare costs

You can really get something out of this. Because if your employer supports you with the costs of accommodating and caring for your children who are not of school age , these subsidies are tax and social security-free to an unlimited extent . This applies, for example, to subsidies for kindergartens, daycare centers, School nurseries and also for nannies.

Can your employer Pay Kindergarten Fees for you?

An important prerequisite for the tax exemption of the employer subsidy is that it is paid in addition to your wages. You must also present the  original invoice to the employer as proof. Finally, as an employee you could deduct  the childcare costs as special expenses in a tax return. So even if your employer does not pay the full amount you can always get a tax refund.

kindergarten subsidy is a very attractive alternative to an individual salary increase with advantages for employers and employees alike. In contrast to a salary increase of the same amount, both sides save on social security and the employee also saves income tax.

Remember, if you are getting Kindergeld from the Government, then you are obliged to Submit a Tax Return in Germany!

What else?

Tax Free Benefits in your German Salary

The tax free benefits don’t stop there! If you use your mobile phone and laptop for work, your employer can reimburse you tax-free for those expenses. And If you work from home often, your employer can even reimburse 20% of your telephone costs tax-free. The telephone cost can be up to a maximum of €20 per month. Plus, an employer can refund the mobile phone costs of its employees tax-free . This even applies if the employer has bought the smartphone from his employee at a very low price and immediately gives it back to him for private use.

Sometime Increasing your salary in Germany can reach a limit from a Full Time Job. That is why it may be helpful if you start side job. My Guide on How to Earn From Home in Germany shares 9 Easy ways to get you started!

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Disclaimer: None of the content in this article is meant to be considered as investment advice, as I am not a financial expert and am only sharing my experience with stock investing. The information is based on my own research and is only accurate at the time of posting this article but may not be accurate at the time you are reading it.

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