Definition
With the help of the Internet subsidy, companies can subsidise the Internet costs of their employees by up to 50 euros per month. The legislator created the internet subsidy to promote the use of new media in private households. The legal basis for the employer's tax-free internet subsidy is the Income Tax Act (Einkommensteuergesetz, LStR) § 40 para. 2 sentence 1 no. 5 EStG (Lohnsteuerrichtlinie, LStR) § 40 para. 2 sentence 1 no. 5 EStG).
What is the internet subsidy?
With the internet subsidy, employers can cover the running internet costs (up to € 50 per month) of their employees. The internet subsidy can be granted regardless of whether the employee works from home or in the company office. It also does not matter whether the employee uses the internet connection for business purposes or purely privately. Allowable costs include the basic fees for internet access (e.g. DSL or cable internet contract) and the costs for hardware and equipment (e.g. modem, computer, connection, etc.). Mobile phone contracts and streaming services are excluded.
Tax regulations of the internet subsidy
- For the employer
For reasons of simplification, every employer can tax the amount stated by the employee:in for current internet usage costs at a flat rate of 25% without further examination, provided that the allowance does not exceed 50 euros per month (2022). In addition, the internet subsidy is exempt from social security contributions.
- For the employee
For the employee, the cash benefit is completely tax and social security free.
Legal background of the internet subsidy
The legislator created the internet subsidy to promote the use of new media in private households. It is not intended to reimburse employees for the costs incurred when they use their private internet connection for official purposes. Rather, it is about the private use of the internet. The legal basis for the employer's tax-free internet allowance is the Lohnsteuerrichtlinie (LStR) § 40 Abs. 2 Satz 1 Nr. 5 EStG (Wage Tax Directive (LStR) § 40 Abs. 2 Satz 1 Nr. 5 EStG).
Advantages of the internet subsidy for companies and employees
If you want to increase the net salary of an employee by 600.00 euros per year through a classic gross salary increase, you have to spend at least twice that amount. With the internet subsidy (e.g. from Circula), companies can increase the salary of their employees by up to 600.00 euros per year and save costs compared to a traditional salary increase. In addition, companies show appreciation for their employees and create the basis for an appropriate teleworking job.
What else is there to consider?
To ensure that the costs of the internet subsidy can be deducted correctly, some important things must be observed. Firstly, the internet subsidy may only be granted for the actual internet costs. Secondly, companies and employees should record the general conditions in writing. Invoices and other contractual documents for the employee's internet connection serve as relevant proof.
Implementing the internet subsidy - very simple with Circula
With Circula, businesses can enjoy all the benefits of internet subsidy with minimal administrative burden:
- Fast implementation:
After signing a short contract addendum, employees only need to declare the amount of their internet costs in order to receive the internet subsidy.
- Automated submission:
No additional administrative work: Once set up, the internet subsidy is automatically paid out to the employees each month.
- Integrations to payroll accounting:
The internet allowance amounts can be seamlessly forwarded to DATEV LODAS, LuG or any other payroll accounting system for payroll accounting.
Enhance your employer brand and retain your employees with the internet subsidy or one of our other attractive and tax-optimised employee benefits.
Conclusion
The internet is our constant companion, whether at work or for private purposes. However, very few employees receive an internet allowance. Yet the internet subsidy not only brings many advantages for the employees, but also for the company, which increases the wages of the employees at low cost and at the same time considerably promotes employee satisfaction.