Is a discount taxable or not taxable

Discount from an external company: What you have to consider for tax purposes

Some employees receive discounts or benefits from third parties when they buy their goods or use a service. These "third parties" can be external companies, for example, but also companies that belong to the employer's group. In the past, these price advantages were taxable - more on that later. However, the Federal Fiscal Court contradicted this opinion of the tax authorities several times and decided that discounts from third parties only represent wages in exceptional cases - for example on October 18, 2012 (File number VI R 64/11):

If the price advantage is a consideration, the tax liability continues

The top judges only made one restriction: "Wages can (exceptionally) also be accepted for the benefit of a third party if this constitutes remuneration 'for' a service that the employee provides for his employer within the framework of the employment relationship (...) . " In short: if the price advantage is something in return, it is a taxable wage.

The specific case: an "employee benefit program"

The owner of a hospital with 750 employees had sued. An external company delivered pharmacy items of all kinds to this hospital on the basis of a supply contract. The plaintiff initiated a so-called employee benefit program: Your employees could also have pharmacy items delivered - with a considerable discount. The tax office assessed the discounts as wages and demanded income tax. However, the BFH saw it differently: The price advantage does not represent wages from a third party and is therefore not subject to wage tax.

In the past, price advantages were taxable

The astonishing thing: With its ruling, the Federal Fiscal Court decided against a long-term practice. If an employee used to get discounts and perks on goods or services from external companies, he had to pay tax on this benefit as wages. At least if the employer was involved in the discount agreement. There was no allowance.

Discounts when concluding insurance contracts are also tax-free

In a further judgment (File number VI R 62/11), the BFH decided in 2014 that there is no wage even in the case of discounts when concluding insurance contracts - provided that in addition to employees of business partners, another group of people such as employees of other companies can benefit from the discount. In this judgment, the judges of the BFH emphasized that the tax court must decide in individual cases whether or not a benefit is "caused by the employment relationship" and thus counts as a salary.

Discount decree from the Federal Ministry of Finance

On January 20, 2015, the Federal Ministry of Finance published a so-called BMF letter to clarify the matter - the so-called discount decree. According to this, price advantages that are granted to employees by third parties are only not considered wages if the external company is primarily acting in its own economic interest. The same also applies if the discount is also granted to other people in normal business transactions, such as the volume discount.

The individual case is still decisive

However, as before, the tax authorities assume that a discount represents wages if the beneficiary's employer has actively contributed to creating the price advantage, for example because there is a close economic relationship between the employer and the external company. Framework agreements of the works council or the staff council - without the involvement of the employer - are excluded from this and do not lead to wages.

That means: Even after the new discount decree of the Federal Ministry of Finance, the facts have not become much clearer and it must still be decided on a case-by-case basis whether a discount is a wage or not. The matter therefore remains a matter of dispute. For example, on October 11, 2018, the Cologne Finance Court ruled (File number 7 K 2053/17) that it is not a question of wages if the employee of an external company receives the same discount as its own employees, although this contradicts the discount decree of 2015.

The specific case: a discount when buying a car

The employee of an auto parts supplier had sued. The car manufacturer, which has a 50 percent stake in the supplier, had included its employees in its discount program for workshop employees. As a result, the plaintiff had bought a new vehicle and received a price advantage of around 1,700 euros over the usual dealer discount, plus 700 euros transfer costs. The tax office treated this as a taxable wage. But the tax court saw it differently. The reason: The car manufacturer granted the discount in its own economic interest and not for the plaintiff's work. This is justified by the fact that employees can buy up to four cars a year at a discount and pass them on to the family.

By the way:

If you receive discounts from your own employer on goods or services that you have produced yourself, this bonus is taxable as a monetary benefit. At least there is a so-called personal discount allowance of 1,080 euros per year. Goods and services from your own company are therefore tax-free up to this amount.

This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to ยง 4 No. 11 StBerG.