Tax & Legal

Recurring remuneration from an employee's mandatory employee profit participation right (PPR) is not generally covered by the provisions of Section 19 (1) sentence 1 no. 1 Income Tax Act (ITA) for income from employment. This was decided by the Supreme Tax Court in a most recently published judgment.

Recurring remuneration from a typical silent partnership between the employee and the employer company is taxable as capital investment income within the meaning of Section 20 (1) No.4 Income Tax Act and not separately as commercial income or income from employment.

In a most recent judgment, the Supreme Tax Court decided that in a case where an employee working in both Germany and Switzerland until the termination of the employment relationship and thereafter is irrevocably released from his duties with continued payment of his salary, the income from employment pursuant to Art. 15 para. 1 sentence 1 of the double tax agreement between Germany and Switzerland is subject to tax only in Germany as the country of residence.

A professional soldier was convicted of a criminal offense and also had to undergo military disciplinary proceedings. At least he can deduct the legal costs of the disciplinary proceedings as income related expenses, the Supreme Tax Court said in a most recent decision.

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.

In two decisions, the Tax Court of Cologne decided that payments of EUR 50,000 and some EUR 1.3 million respectively made to authorized representatives of a GmbH do not generally qualify as tax-free tips but are rather part of the employment and subject to the personal income tax of the recipients.

In its judgement of 21 June 2022, published on 3 November 2022, the Supreme Tax Court decided that remuneration paid by an employer to its employees for advertising by the employer on the licence plate mounting frame of the employee's private car is remuneration for work if the "advertising rental agreement" concluded does not have an independent economic content.

According to the Cologne Tax Court, the preclusion of German employees resident in Switzerland for full assessment of German income tax is contrary to EU law. The court has referred the case to the European Court of Justice (ECJ) for a preliminary ruling with respect to the Agreement for the Free Movement of Persons between the EU and Switzerland.

According to a recent ruling of the Münster Tax Court there is no tax evasion if the taxpayer on the one hand had failed to submit tax returns, but the tax office nevertheless has all the necessary information by means of the automated electronic wage tax certificates.

The Regional Tax Court of Rhineland Palatinate has decided that contributions to the US 401(k) retirement plan deducted at source from the employee's salary are to be taxed as income from employment 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.

According to a judgment of the Supreme Tax Court, a U.S. citizen with limited tax liability in Germany is not entitled to the right of full tax assessment for income from employment even if he lives in an EU or EEA state (here: the Netherlands). The non-discrimination clause in Article 24 of the German/US double tax treaty does not give rise to a claim to equal treatment with a German national with limited tax liability.

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 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.

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 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.

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 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.