Payments from Business Comprehensive Insurance to Employees

A company employed staff who used their private cars for business-related journeys. They received mileage allowances from their employer for these journeys. In addition, the employer provided the employees with comprehensive insurance coverage for journeys undertaken for business purposes. For an additional payment of EUR 100 per year, this insurance coverage could also be extended to private journeys. If an accident occurred during a business trip and an insurance deductible had to be paid, the employer also covered this amount.

The tax authorities concluded that the comprehensive insurance benefits provided by the employer and the deductibles paid by the employer should be treated as taxable benefits from employment at the employee level. The company, however, argued that the insurance coverage was intended to protect the company against potential liability for damages vis-à-vis its employees.

Decisions of the BFG and VwGH

Both the Austrian Federal Fiscal Court (Bundesfinanzgericht, BFG) and the Austrian Administrative Supreme Court (Verwaltungsgerichtshof, VwGH) upheld the tax authority’s position. The key distinction is between the reimbursement of business-related travel expenses through the mileage allowance and any additional benefit received by the employee as a result of the comprehensive insurance coverage or the employer’s payment of the deductible.

The mileage allowance is intended to cover the costs incurred by employees when using their private vehicles for their employer’s business purposes. Any payments made by the employer in addition to the mileage allowance may constitute an additional benefit for the employee and may therefore be taxable at the employee level.

However, the insurance premiums paid by the employer do not constitute a taxable benefit for the employees. The decisive factor is that the employer itself was the policyholder and that only the employer was entitled to make claims under the insurance policy. The employees therefore did not receive a personal benefit merely as a result of the employer paying the insurance premiums.

The situation is different in the event of a claim. If the employer covers damage to an employee’s private car, the employee receives an economic benefit by being relieved of the corresponding expense. This therefore constitutes taxable employment income. This also applies if the accident occurs during a business trip.

Tip

Payroll-related matters regularly involve issues that can have long-term tax implications, including potential liabilities for payroll taxes. Comprehensive and timely advice is therefore essential, particularly in this sensitive area.