Germany: Benefits to promote employee health

Employee health promotion measures benefit from a tax advantage under Article 3, No. 34 Einkommensteuergesetz (EStG), the German Income Tax Act. Companies can invest up to 600 euros per employee per year in these measures which are tax-exempt from personal income tax and social security contributions, and are not considered a benefit in kind for employees.Employers are increasingly investing in health promotion to prevent occupational risks. Measures funded directly by the employer or through external offers are tax-exempt up to 600 euros per employee per year, provided they are certified according to the standards of Articles 20 and 20b Sozialgesetzbuch (SGB) V, the German Social Security Code, Book V.Eligible programs include:

• Sports activities
• Nutrition counseling
• Addiction prevention
• Stress management

Note: Membership fees for sports clubs or fitness centers are not covered. Only additional services beyond contractual obligations are eligible; salary conversions are not. If the investment exceeds 600 euros per year, a review of the employer’s predominant interest is required, or the excess is subject to social security contributions and personal income taxes.

The tax relief provided by Article 3 No. 34 EStG applies to all employees in Germany, including managing partners.However, it does not apply to individuals with other types of income, such as retirees or self-employed workers. Employers can thus invest in health promotion measures for their employees, while the latter can benefit from the personal income tax advantages of this legislation.

Measures that comply with the requirements of Articles 20, 20b SGB V can be subsidized. The GKV-Spitzenverband’s Prevention Guide, the Federation of Health Insurance Funds, and the implementation aid from the Bundesministerium für Finanzen (BMF), the German Federal Ministry of Finance, dated April 21, 2021, detail eligible measures. Since January 1, 2019, only measures certified under § 20 para. 2, sentence 2 SGB V are admissible. A transitional period for non-certified measures was in effect until December 31, 2019, for those that started before January 1, 2019. The GKV sets unified criteria and procedures for the certification of offers by health insurance funds. Primary prevention under Article 20 SGB V aims to improve general health. Eligible measures include:

• Nutrition: Courses and counseling on diet (prevention of malnutrition, weight management).
• Stress management: Training to better handle stress.
• Physical activity: Programs to reduce sedentary behavior and prevent specific health risks.

Some measures not listed in the GKV Prevention Guide may also qualify for a tax exemption. To avoid conflicts with the tax authorities regarding eligibility for the exemption under Article 3 No. 34 EstG, employers are advised to request a free advance tax ruling under Article 42e EStG from the competent tax office.

Workplace health promotion, governed by Articles 20b, 20c SGB V, aims to improve employee health. This includes

• Stress management courses
• leadership training
• addiction prevention seminars
• healthy canteen offers
• training on reducing physical strain

Some measures not listed in the GKV Prevention Guide may also qualify for a tax exemption. To avoid conflicts with the tax authorities regarding eligibility for the exemption under Article 3 No. 34 EstG, employers are advised to request a free advance tax ruling under Article 42e EStG from the competent tax office. 

The tax exemption under § 3 No. 34 EStG applies only to income tax and does not apply to VAT.
When the employer uses an external provider for workplace health measures:

• They can recover VAT on the invoice from the provider.
• If the measure primarily serves the company’s interest and no subsidy from health insurance funds is received, the employer does not pay VAT on this measure. However, they must prove that this has reduced sickness absences.
• If a subsidy is received, the employer must pay VAT on this amount, as it is considered third-party payment. They must also prove a significant reduction in sickness absences.
• For measures primarily benefiting employees, VAT is due on the entire service, as the employer provides a taxable service to its employees.

Cash reimbursements made by the employer for external services are not subject to VAT.

The employer must record the subsidies and expenses related to workplace health, exempt from income tax, in the payroll book. Exceptions are made only if the competent tax administration of the permanent establishment approves the request not to record the allowances in the payroll book.

Who implements the health measures and how does the exemption apply?

The entities responsible for implementing health promotion measures can be social security organizations such as health insurance funds or private providers like health centers, dietitians, or corporate health promotion institutes.The tax authorities apply the exemption under § 3, No. 34 EStG to each employer individually. In the event of a change of employer during the year, the tax exemption remains applicable for each employment contract without proportional reduction. Thus, the new employer is not required to check the exemptions already used by the former employer.