The ruling, which was made by a tax court in the city of Münster, stated that breakfast does not consist of just bread rolls and hot drinks, it is also accompanied by cold cuts, cheese or spreads, German media reported.
Due to the lack of spreads and other types of toppings to accompany the bread rolls, the company in question was not serving a complete breakfast, the tax court found.
After a software company with about 80 employees had been providing in their canteen free hot drinks such as coffee and plain bread rolls for staff, customers and guests each day, the tax office saw this as a "free provision of a meal to the employee in the form of a breakfast."
Taking into account the increase of prices in the past several years, the tax office demanded the company fork out an additional tax payment of €1.50 to €1.57 per employee per day, backdated to cover a period from from December 2008 to December 2011.
But judges in the tax court in Münster have now rejected this, reports Spiegel Online.
The judges saw an exemption limit which was not exceeded in the case, arguing that the dispute was a matter of the food being served.
The state government in Münster have allowed for the federal tax court to appeal.