The tax tip: If the employer lends money

The advantages resulting from interest-free or low-interest company loans are subject to taxation by the employee as a cash benefit. For the determination, there are two evaluation methods.

The advantages resulting from interest-free or subsidized Company Loans are taxed by the employee as a cash benefit. For the determination of cash benefits – which arises when the employer his employee leaves a soft loan – there are two different evaluation methods:
One applies when the employer operates not originally banking, so for example is not even a bank. And one engages in the case in which the employer provides loans of the same type and the same conditions also to its customers and only the interest rate is different when the workers can borrow with that employer.

Loans: Cheap money from the boss

The intrinsic value is, however, only be taxed if it exceeds 44 euros per calendar month, so if the loan amount is correspondingly large.

It is important to determine the financial benefit that the employer the foundations for the determined interest rate advantage – has kept as evidence for payroll account – so the loan agreement and the underlying reference interest rate. For this, he is also required by law.

The time at which the resulting from the subsidized loans monetary advantage is a tax to be considered is the one on which the interest is due. Was the loan even granted at no cost, the monetary advantage arises when the normal interest payable would normally be due – usually this is the case, although the repayment installment is due – this, the Federal Ministry of Finance (BMF) in a letter dated 1 October 2008 clear (Az IV. C5-S 2334/07/0009).
Of particular importance is the BMF letter for the reintroduction of so-called non-took up limit of 2,600 euros. This was abolished in January of this year. Retrospectively it applies now but again the assessment period 2008. Thereafter interest benefits are only taxable as benefits in kind and included in the exemption limit of 44 euros per month if the sum of their outstanding loans exceeds 2,600 euros at the end of the wage payment period. The tax authorities objected to this, although the blanket application of the new rules, such as on the assessment in 2006, that the intrinsic value is not determined in this way in all not become final tax assessments of previous years.

This leaves interest benefits from loans of up to 2,600 euros in determining the imputed income before general outside. Exceed the loans granted the exemption limit of 2,600 euros is to check whether the intrinsic value exceeds 44 euros a month. Only then the employer must withhold income tax on it.