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Employee benefits, Christmas gifts and tips - read about tax rules here
Employee benefits
Employee benefits are awarded to employees in several Danish companies. In this connection, it is important that the employer knows the tax rules that apply to the specific employee benefits.
That is why we have prepared an article that can make you smarter about which employee benefits must be taxed and which benefits are exempt from tax. At the end of the article, we also review the tax rules for tips.
Let's start by taking a closer look at which tax rules apply to employee benefits.
What are employee benefits?
Examples of employee benefits appear below:
- Free board and lodging
- Free car
- Free phone
- Health insurance and treatment
It is also worth mentioning that your employees do not have to pay tax on a number of benefits, including:
- Education expenses, if they have occupational relevance
- Parking space or a toll road automatic pass if the employee uses these in connection with work
- Single company parties and events
- Fruit schemes and similar measures
In addition, your employees must not be taxed on employee benefits that have a total value of up to DKK 6,600. This limit is also called the trivial limit.
However, this requires that the employee benefits have a direct connection with the work. This rule applies to the following employee benefits:
- Free food and drink if the employee works overtime
- Free newspaper, the content must be workrelevant, e.g. business news if your workplace is within the financial industry
- Free card for public transport. This must be issued for commercial transport
- Credit card schemes
- Driving licence (partially) paid for by the company, to be used in connection with the wor
If the amount limit of DKK 6,600 is exceeded, the employee is taxed on the entire total value of the employee benefits. Thus, your employee will be taxed on the entire amount if you give the relevant staff benefits for a value of, for example, DKK 6,700.
It should also be noted that a number of employee benefits are not included in the trivial limit of DKK 6,600, for example:
- Free car
- Free phone
- Free housing
- Free radio and media licence
- Free board and lodging according to the Tax Ministry's rates
- Employee loan
If there is no connection between the employee benefits and the work, your employee must pay tax on the benefits if they add up to a value greater than DKK 1,200 per year.
Should Christmas gifts for employees be taxed?
You can give your employees taxfree physical gifts and other minor staff benefits if the value does not exceed DKK 1,200.
However, different rules apply in relation to Christmas presents. If, for example, the Christmas present has a value of no more than DKK 900 and the remaining gifts you have distributed to the employee during the year have a value of DKK 500, the employee must only pay tax on the DKK 500.
The Christmas gift of no more than DKK 900 counts towards the DKK 1,200 the employer can give its employees in a year without the employee being taxed. Gifts for more than DKK 1,200 mean that the entire amount must be taxed, however, the Christmas gift of no more than DKK 900 can be excluded from the calculation. You can see two examples below:
Normal gift value DKK 600+Normal gift value DKK 800=DKK 1,400
In this example, the employee does not receive a Christmas present. In addition, the amount exceeds DKK 1,200 annually, which is why everything must be taxed
Christmas gift value DKK 900+Normal gift value DKK 500=DKK 1,400
Here the total amount exceeds DKK 1,200. However, the Christmas gift costs DKK 900, which is why it is not taxed. This also means that if the Christmas gift cost DKK 901, it would have to be taxed if the total gift amount from the company in the year in question exceeds DKK 1,200.
Should tips be taxed?
Tips are taxable for the recipient. This applies regardless of whether the tips are paid by customers or by the employer. Thus, employees who receive tips during the working day must pay tax on the amount.
If your employees receive tips directly from a customer, it is basically B income, which is why the employer does not have to be involved. An obvious example would be a waiter receiving a tip from a happy customer. Here, it is the waiter's responsibility to report the tip to SKAT.
However, the employer can also become involved. A number of restaurants, for example, have the habit of dividing the tip equally between the waiters. In this case, it is a bonus, which is why the individual employee must be taxed as A income.
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