Employer's savings card for healthy products
January 2022 – A supermarket chain has obtained a ruling for a tax rebate scheme for staff members of other companies. When a company joins the scheme, its employees receive discounts on healthy products, without the taxman taking his share of the cake.
Contract between employer and supermarket
How does the scheme work? The supermarket enters into an agreement with a company or employer: in exchange for a monthly administrative cost, the employer's staff receives a discount card at the supermarket. The administrative cost is independent of the number of discount cards distributed. The card gives the right to specific discounts on healthy products (e.g. products with a certain nutritional score).
The discount card is personal: the company can only distribute it to its staff and its use is restricted to the staff member and his or her family members living in the same household.
A maximum discount is also agreed on a monthly basis. This discount is granted by the supermarket. The employer is not involved in the discount in any way.
The tax consequences of such an agreement are very diverse. There are of course income tax consequences for the employee and the employer. But there are also consequences for VAT.
Income tax
Any benefit arising from the employment relationship must be considered as a benefit in kind. So a discount on any product - even if it costs the employer (almost) nothing - is a benefit in kind.
However, the benefit must come from the employer. If the staff organise a shopping club to get discounts on books, this is a private initiative in which the employer does not intervene. But in this case it is the employer who organises the discount, so in principle there is a taxable benefit.
For this type of benefit, a distinction is made between benefits that should in fact be considered as remuneration (the classic case) and benefits offered for social reasons (such as gifts for special events or social reasons).
For the Ruling Commission, this discount card must be considered as a social benefit, for the following reasons
the discount card has no market value in itself (it cannot be resold)
the employer offers the discount card to all his employees, without knowing whether these employees go or will go to the supermarket;
the discount is only for healthy products;
the discount is capped and is a negligible benefit with a clear social purpose;
the employer is not involved in the discount;
there is no link between the worker's performance and the level of the discount;
the discount card is not a right for the worker, but a favour;
the terms and conditions for the granting of purchasing power are not defined. The supermarket can periodically modify the percentage of the purchase card received according to commercial or strategic opportunities and provide for differentiation according to the product purchased.
In conclusion: this is an exempt social benefit for the worker.
A social benefit is not deductible
The costs incurred by an employer in providing a social benefit are in principle not deductible for the employer.
But what costs did the employer incur in this case? The employer is not involved in the reduction - therefore there are no costs to be rejected.
Are the service and administrative costs not deductible? The Ruling Commission says that these fees are deductible. In exchange for the service and marketing costs paid, participating companies have the opportunity to do employer branding and external marketing, among other things, which has a positive effect on their taxable income. The amount of the fee does not depend on the purchasing behaviour of the employees.
VAT
There are three relationships whose VAT aspects need to be examined here. The first relationship is that between the employer and the supermarket. This is a relatively simple relationship: the supermarket charges a service fee and an administrative cost to the employer. This is a service on which VAT is due at the standard rate of 21%. For the employer, there is a business purpose - namely profiling as a company concerned with promoting healthy eating - so that the VAT paid is also deductible.
Conversely, there is also a service from the employer to the supermarket: the bringing in of customers is in principle a taxable transaction on which VAT is due. Although staff members are encouraged to shop specifically in this supermarket, the employer has no impact on their decision, nor does it derive any benefit. The Ruling Commission therefore concludes that there is no taxable transaction if the following cumulative conditions are met:
there is no minimum number of cards and no minimum use by employees
the supermarket will not check the extent to which the employer encourages the use of the discount card;
there are no additional discounts granted according to the number of workers using the card;
the employer does not communicate any personal data about its employees to the supermarket;
the amount of service and marketing costs does not depend on the number of discount cards;
the employer does not receive any remuneration for the customers it brings in;
the supermarket does not report on an individual basis to the employer on the use of the discount card by its workers.
The second relationship is that between the worker and the employer. The employer provides the employee with a card with which he can benefit from discounts. But VAT is only due if there is a transaction for consideration - i.e. against payment - which is not the case here. There is therefore no VAT due in this relationship.
The third relationship is between the supermarket and the worker. The supermarket does indeed grant discounts. But discounts and rebates are excluded from the VAT assessment base and this is also the case here.
Not the first time
It is not unusual for employees to receive discounts from outside companies on the basis that they are members of staff of a particular company. For example, it is very common for a member of staff to receive a discount on the purchase of software because the employer has purchased the same software for his company.
However, it is peculiar that the Ruling Commission starts by saying that this discount is in principle a benefit of any kind, before stating that the limited value of the benefit is one of the reasons why it should be considered a social benefit.
The Minister of Finance has meanwhile already indicated that he agrees with the analysis and conclusion of the Ruling Commission. The main reason is the social aspect of the benefit, namely healthy eating.
However, this ruling raises a lot of questions.
The supermarket chain obviously also has a commercial purpose: the worker who goes to the supermarket will probably also buy other goods that he would otherwise buy in another shop.
This ruling also raises again the question of the definition of a modest or limited benefit. A discount card that cannot earn you more than 60 euros per month? A discount of 250 euros on the purchase of a laptop of the brand purchased by your employer? A 250 euros discount on accessories from the same IT brand?
