Non-taxable employee benefits: what an employer can pay free of tax

Non-taxable benefits are the most cost-effective way of rewarding employees: the employee receives the full amount, and the employer bears neither tax nor contributions. But precisely because they are so favourable, the conditions for paying them are precisely prescribed — and a mistake means tax assessed retrospectively, and sometimes contributions as well. Below is an overview of what an employer may pay free of tax and the rules to watch.

Two groups of receipts outside taxation

The Income Tax Act distinguishes between receipts that are not regarded as income at all and receipts on which tax is not payable. The first group includes, for example, receipts for which a natural person provides no market consideration — social support, inheritances and gifts, receipts from the disposal of personal property, compensation — as well as donations for healthcare needs subject to separate records and payment to a bank account. An important warning from the Act itself applies here: if such receipts are connected with the generation of income, they are regarded as taxable income.

The second group covers receipts on which tax is not payable up to prescribed amounts — and this is where employers find what interests them most: the allowances, awards and support payments that may be made to employees free of tax, in the amounts governed by Article 7 of the Ordinance on Income Tax.

What an employer may pay free of tax

The catalogue of non-taxable allowances, awards and support payments in Article 7 of the Ordinance is broad and covers most of the usual situations in an employment relationship:

The amounts up to which these payments are non-taxable are prescribed by the Ordinance and are subject to amendment, so they should always be checked against the version in force before payment.

Remote work: an allowance with a rule that is often overlooked

For work at a remote workplace, the Labour Act provides that the employer must contractually agree reimbursement of costs where such work is agreed as permanent or lasts more than seven working days in a month. For tax purposes, an employee may be paid a non-taxable flat-rate allowance of up to EUR 4.00 per day of work from home, and no more than EUR 70.00 per month. And a detail regularly overlooked in practice: if an employee works from home for a full month, no non-taxable commuting allowance may be paid for that month.

Tips: non-taxable up to the prescribed annual amount

For tax purposes a tip is defined as a reward for a service well performed, received from third parties and recorded in the fiscalisation system — and that is the key condition: the tax rules apply only to tips that have been fiscalised, linked to an issued receipt. The non-taxable portion is the EUR 3,600.00 per year prescribed by the Ordinance — an amount that applies in both 2025 and 2026 — and above that a tip is taxed as other income at a rate of 20 per cent, finally and without contributions.

Non-taxable tips may be paid to employees, to students and pupils working through an agency, and to apprentices on professional practice, and a sole trader may also receive a non-taxable tip, subject to the obligation to report it in the JOPPD form. In the business books, tips are neither income nor expense of the entrepreneur — they are a pass-through item to the employee.

Monitoring the limits: the employer no longer depends on the employee's statement

For non-taxable receipts subject to an annual limit per employee — the occasional award, the award for work results, the flat-rate meal allowance, the holiday allowance, the childcare allowance, premiums for supplementary and additional health insurance, and non-taxable tips — the Tax Administration provides employers with visibility, through the ePorezna system, of amounts already used with other payers. For these receipts, the employee no longer provides the employer with a statement of receipts obtained from another employer: the information is verified directly.

What to check before paying

Before every non-taxable payment it is worth running through a short checklist: are the conditions for a non-taxable payment met; is the total amount within the limit, including payments by other payers; may two non-taxable receipts be paid to the same person; may a receipt set as a monthly amount be paid retrospectively, and for which periods; which receipts may be paid solely on the basis of an employment relationship, and how does payment after the employment relationship ends affect the treatment; and — if more than the non-taxable amount is paid — is only tax due on the difference, or contributions as well. The answers differ from receipt to receipt, and this is precisely where the most expensive mistakes occur.

Conclusion

Non-taxable benefits are a lawful and generous space for rewarding employees, but a space with clearly drawn boundaries: prescribed amounts, prescribed conditions, a prescribed manner of payment. It pays for an employer to set out a policy on non-taxable payments once a year — what, to whom, how much and when — rather than deciding on them payment by payment. If you would like to check whether you are using the non-taxable options to their full extent and without risk, feel free to get in touch.

Amounts verified against the legislation in force in July 2026; before publication in later years, re-check Article 7 of the Ordinance on Income Tax. This article is informational in nature and does not constitute tax advice for any individual case.