If you have small children and have to work, you need appropriate care. This can cost several hundred euros per month. With the kindergarten subsidy, companies can support employees with non-school-age children tax-free.
What is the kindergarten subsidy?
A kindergarten subsidy is a financial allowance that an employer can give to its employees in addition to their salary. With the kindergarten subsidy, the employer contributes to the costs of childcare or meals for children who are not of school age. In Germany, these are usually small children up to the age of five or six.
In addition to providing financial relief for employees, the childcare subsidy is intended to make it easier for employees to pursue their work. In the best case, employees and companies benefit equally from this subsidy. In principle, the kindergarten subsidy is an important component to make it easier for employees to reconcile family and work.
How much is the kindergarten subsidy?
A kindergarten subsidy includes all benefits that an employer can provide in addition to wages and that can relate to childcare as well as board or lodging. The amount of the kindergarten allowance In this case, the kindergarten subsidy is a Non-cash benefits that may only be used for this one purpose.
The legal basis for the kindergarten subsidy is provided by § 3 No. 33 EstG.
Is a kindergarten subsidy tax-free?
The Income Tax Act provides that the kindergarten subsidy is tax-free and exempt from social security contributions. To keep it that way, the allowance must be paid in addition to the actual salary. The payment can be made monthly or once a year.
Further requirements for tax exemption of the kindergarten subsidy:
- The children concerned must not yet be of compulsory school age. The subsidy only applies to children who are not of compulsory school age.
- There is an obligation to provide evidence. Parents must be able to present receipts for the contributions paid to a day care centre. The employer, in turn, is obliged to keep the originals of these receipts. This is to prevent double subsidies.
Good to know: In order to receive the kindergarten subsidy, it is irrelevant which parent pays the kindergarten fees. Each parent can receive the kindergarten subsidy. However, if one parent receives the allowance from their employer, the other parent cannot of course also receive an allowance from their employer.
Important: If a salary conversion is chosen for the kindergarten subsidy, the privilege of tax exemption for this subsidy does not apply. However, the tax-free kindergarten subsidy can replace other voluntary special payments by the employer, e.g. the Christmas bonus.
When are children required to attend school?
School attendance is not compulsory if
- the child has not yet reached the age of six.
- the child has not yet reached the age of six in the current calendar year after 30 June.
For which institutions can the kindergarten subsidy be applied?
The type of care or accommodation does not play a decisive role for the tax-free subsidy of care costs. The facility must only be designed for the care and accommodation of children. Thus, the subsidy can be used for both company and non-company day-care centres, crèches or other forms of care. The costs for an after-school care centre or a childminder can also be covered tax-free by the employer through the kindergarten subsidy.
These benefits are excluded from the kindergarten subsidy
As soon as the employer assumes costs that are not primarily related to childcare or accommodation, the allowances become subject to wage tax. These can be costs for tuition or for transporting the children, e.g. from the place of residence to the day care centre.
The kindergarten subsidy as an important instrument for employee retention
Für Beschäftigte in Unternehmen stellen gerade die Unterbringung und Betreuung von kleinen Kindern eine große Herausforderung dar. Viele Mitarbeitende sehen deshalb nur in der Arbeitszeitverkürzung eine Möglichkeit, um Familie und Beruf besser in Einklang zu bringen. Der Kitazuschuss ist jedoch ein wichtiges Instrument für Unternehmen, um ihren Beschäftigten gerade diese Vereinbarkeit zu ermöglichen. Auf diese Weise wird der Zuschuss zu einem wichtigen Aspekt im Employer Branding und elementar für die Mitarbeiterbindung.
Another major advantage of the kindergarten subsidy is that it is not tied to any upper limit, regardless of other employee benefits such as a meal allowance, a mobility budget or an internet allowance. Childcare can thus be granted tax-free regardless of other limits on Non-cash benefits.