Option 1: The Classic Christmas Party as a Framework for Gifts

The company event, above all the Christmas party, is probably the best-known way to provide tax-favored benefits. The rules for this have been stable for years and continue to apply in 2025.

The €110 Allowance: What’s Included?

For company events, the legislator grants an allowance of €110 (gross) per participating employee [1]. This amount applies to up to two events per year.

This is an allowance, not an exemption limit – an important difference:‍

Allowance vs. Exemption Limit

• Allowance: Only the amount exceeding the limit must be taxed.
• Exemption limit: If the limit is exceeded by even one cent, the entire amount becomes taxable.

The €110 includes all costs that can be directly attributed to each employee. These include:

• Food and drinks
• Room rental and incidental costs
• Music, artist fees, or entertainment program
• Travel costs (e.g., a chartered bus)
• And also gifts!

Example Calculation: Gift Within the Allowance

Result:

Since the total costs amount exactly to €110, the entire event – including the gift – is completely exempt from tax and social security.

What Happens If the Allowance Is Exceeded?

Assume the gift is more expensive and the total costs amount to €140 per person.

In this case, only the exceeding €30 would be taxable. The employer can choose to tax this €30 at a flat rate of 25%. This is usually cheaper than individual employee taxation.

Important: Careful documentation is essential! Keep an accurate list of participants to be able to prove the per-capita costs precisely.

Option 2: The Monthly Non-Cash Benefit – Flexibility Beyond Christmas

Independent of company events, employers can grant their employees tax- and social-security-free non-cash benefits every month. This option is ideal for a flexible Christmas gift.‍

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The €50 Non-Cash Benefit Exemption Limit

Since 2022, the monthly exemption limit for non-cash benefits has been €50 [2].

As the name suggests, this is an exemption limit – if exceeded, the entire benefit for that month becomes taxable and subject to social security.

This instrument can be perfectly used for a Christmas gift in December, provided the employee has not received any other non-cash benefits (e.g., fuel voucher) that month.

Deep Dive: The Employee Benefit Card – The Modern Christmas Gift

A particularly attractive and contemporary form of non-cash benefit is the employee benefit card.

This is a rechargeable prepaid card (often a prepaid credit card) that the employer can top up with up to €50 per month.

Employees can then use this credit flexibly at many acceptance partners.

However, since a law change in 2022, strict rules apply here – the so-called ZAG criteria (§2 para. 1 no. 10 Payment Services Supervision Act).

For a gift card to count as a non-cash benefit rather than taxable cash, it must meet at least one of the following criteria:

• Limited Network: The card can only be used at a defined circle of merchants in Germany (e.g., certain retail chains or local businesses within one city).
• Limited Range of Goods/Services: The card can only be used for a very limited range of products or services (e.g., fuel only, books only, etc.).

Practical Examples of ZAG Compliance:

• Permitted: A city gift card valid for participating local stores; a benefit card limited to a region via postal codes (e.g., HERO Card by Regional Hero); a voucher for one specific shop.
• Not Permitted: A general Amazon voucher (too broad product range); a general prepaid credit card without regional or product restriction.

For Christmas 2025 this means:

You can top up your employees’ HERO Card with €50 in December. They can use this credit for their Christmas shopping throughout the region – a highly flexible and welcome gift that remains fully exempt from taxes and contributions for both sides.

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Option 3: Flat-Rate Taxation According to § 37b EStG – When You Want to Give More

If you wish to give a gift that exceeds the mentioned allowances and exemption limits, you can use flat-rate taxation under § 37b EStG [3].

This rule allows the employer to take over the tax burden.

The conditions are:

• Applies to non-cash gifts granted in addition to wages.
• The employer pays a flat-rate tax of 30 % (plus solidarity surcharge and, if applicable, church tax) on the gift’s value including VAT.
• The maximum amount is €10,000 per employee per year.
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Important disadvantage:

Although the wage tax is borne by the employer, this type of benefit is subject to social security contributions.

Contributions to health, care, pension, and unemployment insurance must be paid.

All Options for 2025 at a Glance

Checklist: Tax-Free Christmas Gifts 2025

• Choose your strategy: event, monthly benefit, or combined
• Calculate budgets accurately and track all costs
• Ensure benefit cards are ZAG-compliant
• Maintain participant lists and receipts
• Ensure benefits are in addition to salary, not salary conversion

Conclusion

In 2025, employers have attractive ways to give tax-free Christmas benefits. Traditional parties remain ideal for gifts up to €110, while benefit cards offer a flexible modern alternative for individual shopping and experiences.

With proper planning and documentation, companies can show appreciation generously — while staying fully compliant and securing maximum tax advantages.