Tax & Legal

The Supreme Tax Court has allowed an employer a refund of the income tax paid on a fraudulent salary overpayment despite notification of the tax deduction to the employee, on the grounds that the tax had not been deducted from employment income.

The Supreme Tax Court has held that the return of employee shares at a guaranteed price leads to employment income in the year of return in the amount by which the price exceeds the market value.

The Supreme Tax Court has held that staff rebates are not employment income if the same rebate is available to employees of other, non-related companies.

In two cases the Supreme Tax Court answered questions raised on the calculation of the “stay away” days (non-return days) of cross-border commuters when returning to their domestic residence from a third-country business trip and of the allocation of the right of taxation of the employment income of executive directors under the German / Swiss tax treaty.

The Supreme Tax Court has held that work performed in Austria by a German resident is taxable there under the double tax treaty. However, any work performed in a third country is taxable in Germany as the country of residence.

The Münster Tax Court decided that the income from work carried out in prison by a person placed in preventive detention is subject to income tax as remuneration from employment.

According to a most recent decision of the Supreme Tax Court, the income from employment of a pilot resident in Germany and who is employed in international air traffic by a Swiss-based company is only exempt from German income tax (subject to progression) to the extent that he performs his activity on Swiss soil and in Swiss airspace in accordance with the principle of territoriality.

The Supreme Tax Court has held that an employee may deduct his accommodation and commuting costs while on secondment abroad from his employment income (if taxable) as travelling expenses.

The Supreme Tax Court has laid its doubts on the constitutional propriety of the treaty override switch over provision in respect of employment income not taxed in a foreign state with the taxing right under a treaty.

With effect from 2011, the employment income of German resident aircrew flying for British airlines is entirely taxable in Germany, whilst the earnings of personnel flying for Irish airlines are fully taxed in Ireland.

The Supreme Tax Court has held that compensation paid to a German resident employee of a French company for his redundancy is taxable in France by virtue of the particular wording of the employment income article of the double tax treaty.

The Supreme Tax Court held that only work actually performed abroad may be included when reviewing the 183-day period under the employment income regime of the German-French tax treaty. Interruptions caused by work-free time on sundays, weekends,and holidays would generally not be counted.

The Supreme Tax Court has held that the pre-retirement pay of an employee with no further duties remained taxable in Germany as employment income despite his move to France.

In its plenary session on 28 October 2022, the Bundesrat gave the green light for the payment of an energy price flat rate sum to recipients of old age and other pensions by approving the corresponding bill from the Bundestag, which had had its second reading on 20 October 2022. Also approved was the upper limit for employment income subject to social security contributions.

The correction of a final tax assessment notice pursuant to Section 50d (8) sentence 2 of the German Income Tax Act is only possible if – contrary to the provision in the double tax treaty - the employment income of an unlimited taxpayer has been wrongly included in the income tax assessment by omitting to produce proper documentation as required in Section 50d (8) Income Tax Act. It follows from this decision of the Supreme Tax Court that the possibilities of amending tax assessment under Section 50d (8) sentence 2 Income Tax Act are strictly limited and only apply in exceptional cases.

The Constitutional Court has held the treaty override provisions of the Income Tax Act making treaty exemption dependent upon proof of taxation or explicit exemption in the other state do not breach the formal provisions of the constitution if they took effect after enactment of the treaty.

The Supreme Tax Court has held that the compulsory pension insurance contributions of a German resident employee working in Switzerland are incurred in connection with tax-free income and are therefore not deductible in Germany.

An employer's certificate is sufficient for the proof of taxation of wages in India in order to claim tax exemption under the relevant terms of the Double Tax Treaty between Germany and India. The submission of an official income tax assessment notice is not mandatory for claiming the exemption under the subject-to-tax clause of the German Income Tax Act.

The Supreme Tax Court refused leave to appeal on a case involving the double tax residence of a German unlimited taxpayer.

The finance ministry has decreed a suspension of 2010 tax assessments on commuters to Luxembourg in respect of time spent in Germany whilst sick, on holiday or training.