The internet allowance is a voluntary financial benefit provided by employers to help their employees offset the costs of their internet connection. This type of support has become particularly significant with the rise of remote work and hybrid work models, as a stable and fast internet connection has become a fundamental requirement for many employees to perform their work from home. By offering such an allowance, companies acknowledge the use of private infrastructure for professional purposes and demonstrate that they value modern working conditions and want to ensure their employees are well-equipped in their home office environment.
In Germany, employers have attractive options to structure internet allowances in a tax-advantageous way, particularly when employees use their private internet connection for work purposes. The most common method is the flat-rate taxation according to Section 40, Paragraph 2, Sentence 1, Number 5 of the Income Tax Act (EStG). Employers can apply a flat tax rate of 25% (plus solidarity surcharge and, if applicable, church tax) on allowances for private use of company data processing equipment (PCs, smartphones, etc.), related software, and internet usage. This flat-rate tax is paid by the employer. For employees, this allowance is generally exempt from tax and social security contributions, making it significantly more valuable in net terms than a regular salary increase of the same amount. The usual requirement is that employees must confirm in writing that they incur corresponding internet costs. While the amount of the allowance isn't legally prescribed and varies according to company policies, it's often based on typical costs for a private broadband connection (e.g., 20 to 50 euros monthly).
Alternatively, the subsidy could be paid as regular wages subject to full tax and social security contributions, though this would be less advantageous for employees. Only in cases where it can be proven that the internet connection is predominantly used for business purposes (over 90%) or is directly provided by the employer as a work tool, the costs might be treated as tax-free reimbursement. However, this rarely applies to typical home internet connections.
The advantages of an internet allowance (with flat-rate taxation) are clear: Employees receive tangible financial relief for costs they would incur anyway and feel supported in their modern way of working. Employers position themselves as attractive and contemporary, promote the technical prerequisites for productive remote work, and utilize a relatively easy-to-administer option to increase their employees' net income. As part of a modern benefits package, the internet allowance is thus a practical and meaningful addition that meets the demands of today's working world.