When employers implement personal protection measures or security installations for their employees, careful attention must be paid to the associated tax implications. Recently, the German tax authorities issued updated guidance on the treatment of such expenses. This article provides an overview of the key points for employers and employees.
Employers may incur expenses for various security-related measures, such as employing personal protection staff, installing security systems in homes, or providing security-enhanced vehicles. The tax treatment of these measures depends largely on whether they are deemed to serve the employer’s business interests or represent a benefit to the employee.
Personal Protection
Expenses incurred by employers for staff exclusively assigned to personal protection, such as bodyguards or security officers, do not result in taxable income for the employee receiving the protection. These costs are considered to serve the employer’s predominantly business interests, as they aim to mitigate risks associated with the employee’s role within the company. This distinction ensures that employees are not unfairly taxed for measures required primarily to protect the employer’s operations.
Installation of Security Features in Homes
The tax treatment of employer-funded security installations in an employee’s residence, whether rented or owned, is influenced by the level of risk to which the employee is exposed. Risk assessments conducted by competent authorities, such as security agencies, are key in determining this. Employees categorized under high-risk levels (1 to 3) are treated differently than those without a specific risk assessment.
For employees classified as being at high risk, employer-funded security installations are generally not considered taxable income, as they primarily serve the employer’s business interests. For employees in risk level 3, this non-taxable treatment typically applies to costs up to €30,000. However, expenses exceeding this threshold are only exempt from taxation if the installations are explicitly recommended by the security authority.
In contrast, for employees who have not been identified as facing a specific risk, employer expenditures on security installations are treated as taxable income. The benefits are considered to have been received at the time of installation, regardless of whether the security measures become the property of the employee. Additionally, subsequent changes in an employee’s risk level do not retroactively alter the tax treatment unless the change occurs within the same tax year as the installation.
Reimbursement of Costs
If employers reimburse employees for the costs associated with installing security measures or for ongoing operational and maintenance expenses, such reimbursements may also be treated as non-taxable. This exemption applies if the original expenses meet the criteria outlined for high-risk employees and if the reimbursement is directly tied to the installation or the associated operational costs.
Security-Enhanced Vehicles
In cases where employees are provided with armored or security-enhanced vehicles for private use, the tax treatment follows established guidelines. The taxable benefit for the private use of such vehicles is generally calculated based on the value of a comparable, non-armored vehicle that would have been provided in the absence of specific security risks. This ensures that employees are not disproportionately taxed for the additional costs of security features deemed necessary for their roles.
Implementation of New Rules
The updated guidance issued by the German tax authorities on November 11, 2024, supersedes the previous rules from June 30, 1997, and applies to all open cases. The new rules are stricter in some areas, particularly regarding the tax treatment of employer-funded security measures for employees without a specific risk classification.
Transitional Provisions for 2024
For employees with non-specific but credible threats, the more lenient rules of the previous guidance may still apply. This applies to wages paid before December 31, 2024, or to other compensation received prior to January 1, 2025. Under the earlier rules, employer-funded security installations up to €7,670 per property were generally considered to serve the employer’s interests and were not treated as taxable income. Starting in 2025, however, any such expenses will be treated as taxable from the first euro.
For employers and employees, these changes underscore the importance of understanding the tax implications of security measures and ensuring compliance with the latest regulations. For further questions or assistance, please contact us at WW+KN, a Baker Tilly Company, via info@payrollgermany.de.