Short update on the tax-free employee bonus 2025

After the expiration of the tax-free employee bonus on 31 December 2024, many employers wondered whether the legislature would introduce a new tax benefit for bonuses and allowances for 2025. The draft of the Austrian Budget Accompanying Act 2025 (BBG 2025) now proposes such a benefit.

In 2025, employers will have the opportunity to grant their employees a tax-free employee bonus of up to EUR 1,000. The continuation of the tax-free bonus is planned for 2026, with an evaluation of its effectiveness and the available budget to be conducted, followed by a decision on the amount of the tax-free employee bonus and the requirements. The proposed legislation for the regulation of the bonus for 2026 is expected to be presented by the end of May 2026.

Planned requirements for the tax-free employee bonus 2025

• The employee bonus must constitute an additional payment that was not usually granted and thus cannot be part of regular bonus structures, performance agreements or extraordinary salary increases.
• Previous bonuses, such as the Corona bonuses granted in 2020 and 2021 (section 124b subsec. 350 EStG (Austrian Income Tax Act)), the inflation bonuses granted in 2022 and 2023 (section 124b subsec. 408 EStG), and/or an employee bonus granted in 2024 (section 124b subsec. 447 EStG), should not be considered usual payments and therefore should not affect the tax exemption of the employee bonus 2025.
• The employee bonus may also be granted to individual employees only. A group characteristic, as previously required, is no longer needed for tax exemption. However, if differentiation is made in terms of amount or among employees, this distinction must be justified on operational grounds and be objectively justified.
• Contrary to previous regulations, authorisation for the payment of a tax-free employee bonus by the applicable collective agreement or company agreement is no longer a requirement for the tax-free granting of the employee bonus 2025.

Additional remark

If, in addition to the employee bonus, a tax-free profit sharing according to section 3 para. 1 subsec. 35 EStG is granted, a total of up to EUR 3,000 can be considered tax-free for both the employee bonus and the profit sharing.

Exceeding the limit

If more than EUR 1,000 in tax-free employee bonuses (whether from one or multiple employers) is paid out in 2025 or if the combination of the tax-free employee bonus and the tax-free profit sharing exceeds the EUR 3,000 limit, this will trigger a mandatory assessment situation. Employees must then declare and tax the excess amount according to the standard tax rates in their annual tax assessment.

In conclusion

The planned regulation for the tax-free employee bonus aims to allow employers to set incentives for individual performance and visibly reward exceptionally committed employees. For employees, it is intended to provide direct financial relief that also strengthens motivation and ties to the company.

The elimination of the group characteristic and the requirement for collective agreement authorisation will significantly simplify the practical handling from our perspective and are therefore welcomed.

For questions regarding the planned 2025 tax-free employee bonus or its individual implementation in your company, the People & Organisation Team is happy to assist you.