Investing in employee health is a strategy that pays off for the company.
In Germany, companies can promote the health of their staff in a way that carries tax advantages for the employees as well. By investing up to EUR 600 per employee per year in certified measures, employers support their staff’s health. This spending is exempt from income tax and social security contributions, it helps to avoid risks at the workplace and it improves wellbeing at work.
The tax framework
Workplace health promotion measures are tax-privileged under § 3 Nr. 34 of the German Income Tax Act (EStG). Companies can invest up to EUR 600 per employee per year in such measures; the amount is exempt from income tax and social security contributions and does not count as a benefit in kind for the employee.
Employers are investing more and more in health promotion in order to prevent occupational risks. Measures financed directly by the employer or through external providers are free of tax up to EUR 600 per employee per year, provided they are certified to the standards of §§ 20 and 20b SGB V, the German Social Code, Book V.
Note: Membership fees for sports clubs or gyms are not covered. Only additional benefits going beyond contractual obligations qualify; salary conversion does not. Where the investment exceeds EUR 600 a year, it has to be examined whether the employer’s own interest predominates; otherwise the excess is subject to income tax and social security contributions.
Who the relief applies to
The tax relief under § 3 Nr. 34 EStG applies to all employees in Germany, managing shareholders included. It does not apply to people with other types of income, such as pensioners or the self-employed. Employers can therefore invest in health promotion measures for their staff while the staff benefit from the personal income tax advantages of the rule.
Which measures qualify
Measures meeting the requirements of §§ 20, 20b SGB V can be subsidised. The prevention guide of the GKV-Spitzenverband, the national association of statutory health insurance funds, and the implementation guidance issued by the Federal Ministry of Finance (BMF) on 21 April 2021 describe which measures qualify. Since 1 January 2019, only measures certified under § 20 Abs. 2 Satz 2 SGB V are admissible. For non-certified measures that had begun before 1 January 2019, a transitional period ran until 31 December 2019. The statutory health insurance system sets uniform criteria and procedures for certifying the funds’ offerings.
Primary prevention under § 20 SGB V
Primary prevention under § 20 SGB V aims at improving general health. Qualifying measures include:
- Nutrition: courses and advice on nutrition (preventing malnutrition, weight management).
- Stress management: training in dealing with stress.
- Physical activity: programmes to counter a lack of exercise and to prevent particular health risks.
Workplace health promotion under §§ 20b, 20c SGB V
Workplace health promotion, governed by §§ 20b, 20c SGB V, aims at improving the health of the workforce:
- Courses on stress management
- Seminars on addiction prevention
- Training on reducing physical strain
Some measures not listed in the statutory prevention guide can also qualify for relief. To avoid disputes with the tax authorities about claiming the exemption under § 3 Nr. 34 EStG, employers are advised to apply to the competent tax office for a free binding ruling under § 42e EStG.
VAT treatment
The exemption under § 3 Nr. 34 EStG applies to wage tax only, not to VAT. Where the employer engages an external provider for workplace health measures:
- It can recover the VAT charged on the provider’s invoice.
- Where the measure primarily serves the interests of the business and no subsidy is granted by the health insurance funds, the employer does not have to pay VAT on it. It does, however, have to show that sickness absence has fallen as a result.
- Where a subsidy is granted, the employer has to pay VAT on that amount, since it counts as payment by a third party. Here too, a significant reduction in sickness absence has to be shown.
- For measures that primarily benefit the employees, VAT is payable on the whole supply, since the employer is making a taxable supply to its staff.
Cash payments by the employer for external services are not subject to VAT.
Record-keeping and responsibilities
The employer has to record subsidies and expenditure on workplace health that are exempt from wage tax in the payroll account. Exceptions are possible only where the tax office responsible for the permanent establishment approves an application not to record them there.
The bodies responsible for carrying out health promotion measures may be social insurance institutions such as health insurance funds, or private providers such as health centres, nutritionists or institutes for workplace health promotion.
The tax authorities apply the exemption under § 3 Nr. 34 EStG to each employer separately. Where the employer changes during the year, the exemption remains available for each employment contract without being reduced pro rata. The new employer is therefore not obliged to check what allowance the previous one has already used.