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Federal Fiscal Court BFH: Assumption of the employee's tax consultancy costs is tax-free in case of net wage agreements

- Change of jurisdiction -

By judgment of 9 May 2019 - VI R 28/17, the Bundesfinanzhof (BFH) ruled that the employer's assumption of the employee's tax consultancy costs does not result in a wage if the employer and the employee have concluded a net wage agreement and the employee has assigned his tax refund claims to the employer.

The BFH has thus abandoned its adverse case law (BFH ruling of 21 January 2010 - VI R 2/08). He now decided that the employer had assumed the tax consultancy costs not for the remuneration of the employees, but in his own interest, which was predominantly in his own company. In these cases, the assumption of the costs for the preparation of the income tax returns does not constitute wages.

Analysis:

With the currently published BFH judgement of 9 May 2019 - VI R 28/17, the tax consultancy costs assumed in the employer's interest no longer have to be taxed in the cases of secondment with a net wage agreement. This is to be welcomed, since the previous opinion of the Federal Fiscal Court was inappropriate and, together with the extrapolation to a gross amount, led to high ancillary wage costs as a net wage.

For assessment periods up to and including 2018, employers can offset this positive change in case law, e.g. within the framework of external wage tax audits. For these years up to and including 2018, it should in any case be reviewed whether the respective income tax assessments can still be changed under procedural law.

To the extent that tax consultancy costs for net wage agreements should be taxed at source in 2019 under the old legal situation, they can still be corrected in the current wage tax procedure. This is recommended, as the extrapolation of the tax consultancy costs to a gross amount is not necessary.

For further questions please contact

                                          
Björn Christian Gerow        
Steuerberater  
Fachberater IStR

+49-211-17257-0

b.c.gerow@egsz.de

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