Company health insurance as a business expense: optimising tax advantages for companies
27.05.25
6
Minutes
Katrin Straub
Managing Director at nextsure
Company health insurance (bKV) is more than just a benefit – as a business expense, it can reduce your tax burden. Find out how to make use of this advantage and which tax aspects you need to consider in order to structure up to fifty euros per employee per month tax-free.
The topic in brief and concise terms
Contributions to company health insurance can be deducted as business expenses and can reduce the company’s tax burden; for employees, the benefits are tax-free.
Up to 50 euros per month per employee can remain exempt from tax and social security contributions as a benefit in kind if certain conditions are met.
If the 50-euro threshold is exceeded, there are various taxation models (individual, flat-rate, net salary), which should be selected carefully in consultation with a tax adviser.
Quick Facts: bKV as a business expense at a glance
Contributions to company health insurance (bKV) can be claimed by companies as business expenses. This reduces taxable profit and therefore lowers the company's tax burden. For employees, the benefits from bKV are generally tax-free.
Under certain conditions, contributions for the employee also remain exempt from income tax and social security contributions. This is where the so-called EUR 50 non-cash benefit exemption limit per month and employee applies. If this limit is exceeded, there are various taxation models. Careful review and documentation are essential for recognition as bKV as a business expense.
Practical section: bKV in everyday business life – examples and calculation methods
Introducing company health insurance as a business expense raises practical questions. A key point is compliance with the fifty-euro non-cash benefit exemption threshold. Suppose a company pays forty euros per employee per month for the company health insurance and grants no other non-cash benefits; in that case, this amount remains exempt from tax and social security contributions for the employee. The company can deduct the forty euros in full as a business expense.
What happens if the fifty-euro threshold is exceeded? If the company health insurance contribution is, for example, sixty euros per month, the entire amount becomes subject to tax and social security contributions for the employee, provided flat-rate taxation has not been chosen. Here are some options for this case:
Individual taxation: The company health insurance contribution is treated like normal salary. This increases the employee’s gross income and is subject to their personal tax rate.
Net wage taxation: In addition to the company health insurance contribution, the employer also covers the employee’s taxes and social security contributions arising from it. The employee’s net income remains unchanged; for the employer, this is the most costly option.
Flat-rate taxation: Under certain conditions, the employer may remit income tax at a flat rate, for example at thirty percent under Section 37b of the Income Tax Act (EStG).
Correct recording in the payroll account is crucial. A suitable supplemental health insurance as company health insurance can thus become a real benefit for both sides. The exact calculation should always be carried out with a tax adviser in order to find the optimum solution for the company.
Expert depth: Legal basics and structuring tips for bKV as a business expense
The tax treatment of company health insurance as a business expense is anchored in the Income Tax Act (EStG). Under § 4 Abs. 4 EStG, expenses incurred for business reasons are deductible as business expenses. This includes the employer’s contributions to bKV. It is important that the employer is the policyholder and that the employee has no entitlement to a cash payment instead of cover in order to make use of the benefits-in-kind rule under § 8 Abs. 2 Satz 11 EStG.
Our expert tip: draw up a benefit policy. This document states that bKV is an additional voluntary benefit provided by the employer and is not part of the remuneration already owed. This underlines its character as a benefit in kind and can help prevent discussions with the tax office. For the benefits that the employee receives from bKV, tax exemption under § 3 Nr. 1a EStG applies.
If the €50 exemption threshold is exceeded, lump-sum taxation options may be considered:
Lump-sum taxation under § 37b EStG: At a rate of thirty per cent (plus solidarity surcharge and, where applicable, church tax), benefits of up to ten thousand euros per year and employee can be taxed at a flat rate. Please note that this must then be applied uniformly to all such benefits in the financial year.
Lump-sum taxation under § 40 Abs. 1 S. 1 Nr. 1 EStG: This option is available for other remuneration items (e.g. requiring annual premium payment) of up to one thousand euros per year and employee when there is a larger number of employees (often from twenty upwards) and can lead to exemption from social security contributions. An application to the tax office responsible for the place of business is required for this.
Co-insurance of family members is often possible; the tax treatment depends on the specific design and should be checked separately. It is advisable to examine the details of a private health insurance policy in the bKV context carefully. The complexity of the rules makes advice from your tax adviser essential in order to structure company health insurance as a business expense optimally.
Distinction and combination options: company health insurance and workplace health promotion
It is important to distinguish corporate health insurance (bKV) from tax-free health promotion under § 3 No. 34 EStG. While bKV is primarily aimed at providing cover in the event of illness and offers improved medical benefits, health promotion focuses on preventive measures. For certified courses on stress management or back exercises, employers can spend up to six hundred euros per employee per year free of tax and social security contributions.
However, these two tools are not mutually exclusive, but can complement each other in a meaningful way. A company can, for example, offer a bKV that covers dental prosthetics and treatment by a chief physician, and additionally fund yoga classes as part of health promotion. The bKV contributions fall under the fifty-euro non-cash benefit exemption limit or are taxed at a flat rate, while the costs for the yoga classes may fall under the six-hundred-euro threshold of § 3 No. 34 EStG. This creates a comprehensive package for employee health. Occupational pension provision is another component of employee benefits that must be considered separately.
Securing long-term benefits: employee retention and corporate image through company health insurance
The implementation of company health insurance as a business expense offers more than just tax relief. It is a powerful tool for employee retention and recruitment. In times of skills shortages, a company health insurance scheme with attractive benefits can make the decisive difference and reduce staff turnover by up to ten per cent. Employees feel appreciated when the company invests in their health. This often leads to greater motivation and productivity.
Another advantage is the improvement of the company image. An employer that looks after its workforce beyond the usual extent positions itself as socially responsible and modern. This can increase attractiveness to potential applicants by up to fifteen per cent. The correct tax treatment, for example the use of insurance policies in the tax return, is an important aspect. Investing in company health insurance therefore pays off on several levels and supports sustainable personnel policy.
The path to the optimal company health insurance solution: advice and implementation
The selection and introduction of company health insurance requires careful planning. First, the needs of employees and the financial resources of the company should be analysed. There are numerous providers and tariff models that differ considerably in scope of benefits and cost. A comparison of different offers is therefore essential. HanseMerkur, for example, offers special company health insurance tariffs tailored to different company sizes and sectors.
The tax aspect must be taken into account from the outset. Clarify with your tax adviser which taxation model (benefit in kind, flat-rate taxation) is most advantageous for your company. DKV points out that the internal circumstances of each employer are different and that the tax consequences of the contract design must be assessed individually. Clear communication of the new benefit to employees is crucial for acceptance. Also consider the possibility of deducting direct insurance policies for tax purposes as part of your overall strategy for employee benefits. With a well-considered approach, company health insurance becomes a valuable tool for your business.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific optimisation recommendations.
More useful links
Haufe offers a detailed article on the tax treatment of company health insurance.
Wikipedia provides a comprehensive overview of company health insurance.
PKV-Verband provides information in a press release about the success of company health insurance as a model for better preventive care.
Handelsblatt highlights the growing popularity of company health insurance among businesses.
Bundesgesundheitsministerium offers information on workplace health promotion.
IHK München provides information on the tax aspects of workplace health promotion.
AOK explains the tax incentives available for workplace health promotion measures.
Statistisches Bundesamt (Destatis) provides data on healthcare expenditure in Germany.
GKV-Spitzenverband provides information on prevention and workplace health promotion.
FAQ
Can I always claim company health insurance as a business expense?
Yes, contributions to company health insurance borne by the employer are generally deductible as business expenses under § 4 Abs. 4 EStG, as they are incurred for business reasons. This also applies to any flat-rate tax that may arise.
What happens if the bKV contribution exceeds the €50 exemption threshold?
If the value of the non-cash benefit (including company health insurance (bKV) and, where applicable, other non-cash benefits) exceeds the EUR 50 tax-free threshold, the entire amount becomes subject to tax and social security contributions for the employee, unless the employer chooses a form of flat-rate taxation (e.g. under Section 37b EStG or Section 40 EStG).
Do my employees have to pay tax on the benefits from the company health insurance scheme?
No, the benefits received by employees from company health insurance, such as subsidies for visual aids or dental prostheses, are tax-free for employees pursuant to § 3 No. 1a EStG.
What role does the benefits policy play in company health insurance?
A benefit policy is recommended to make it clear that bKV is a voluntary additional benefit provided by the employer and not part of regular salary. This supports the argument for treatment as a non-cash benefit and can help avoid tax disadvantages.
Can I also cover my employees’ family members under the company health insurance?
Yes, many company health insurance plans allow family members to be covered as co-insured persons. However, the tax treatment of these contributions must be considered separately, as this may be regarded as an additional benefit to the employee or as a benefit to third parties (§ 37b of the German Income Tax Act). It is advisable to clarify this with a tax adviser.
Is company health insurance the same as company health promotion under Section 3 No. 34 of the German Income Tax Act?
No, these are two different things. bKV covers medical expenses. Health promotion under Section 3 No. 34 of the Income Tax Act (EStG) allows employers to provide tax-free subsidies (up to 600 euros per employee per year) for certified preventive courses (e.g. exercise, nutrition). However, both measures can be combined.
