Questions & Answers
Answers to common questions.
Curated from our articles on tax advisory, statutory audit and legal services — alphabetical, filtered by audience or topic.
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When does the pro rata forfeiture of losses under § 8c (1) KStG cease to apply?
Following the Bundestag resolution of 8 November 2018, § 8c (1) KStG is being repealed in full without replacement. The rule therefore no longer applies not only for the period 2008 to 2015, which the Federal Constitutional Court found objectionable, but also for share acquisitions from 2016 onwards. As a result, transfers of shareholdings between 25% and 50% no longer trigger a pro rata forfeiture of losses.
As of: November 2018
When does the documentation obligation for cross-border tax arrangements under the EU Mandatory Disclosure Directive apply?
The EU Mandatory Disclosure Directive (DAC6) has triggered certain documentation duties as early as 25 June 2018, even though the actual reporting obligation only needs to be fulfilled by 31 August 2020. This creates a so-called look-back period during which taxpayers and intermediaries must review and document relevant arrangements, even though the national implementing legislation has not yet been fully enacted.
As of: July 2019
When does breakfast qualify as a meal for tax purposes?
For wage tax purposes, breakfast requires that the baked goods be served with at least a spread or topping. Only then does it qualify as a meal, the free provision of which must be recorded as wages at the official benefit-in-kind value.
As of: October 2019
From which assessment year does the extended filing deadline for income tax returns apply?
The extended filing deadline applies for the first time to the income tax return for 2018, which is due in 2019. From 2019 onwards, taxpayers therefore have two additional months to prepare and submit their return.
As of: January 2019
Until when does the old property tax calculation remain in effect?
The Bundesverfassungsgericht (Federal Constitutional Court) has provided for a transitional period: the previous calculation method may continue to be applied until 31 December 2024. From 1 January 2025 onwards, the new rules must be applied on a mandatory basis.
As of: August 2019
By when does the Federal Court of Auditors consider a complete abolition of the Soli feasible?
According to the Federal Commissioner for Efficiency in Public Administration (BWV), a complete phase-out of the solidarity surcharge would be possible by the end of the new financial planning period in 2023. This would also be compatible with the debt rule, provided that corresponding planning reserves are included in the 2019–2023 financial plan.
As of: June 2019
By when must the 2018 income tax return be filed?
The 2018 income tax return must generally be filed with the tax office by 31 July 2019. Starting with assessment year 2018, this represents a two-month extension compared to the previous deadline of 31 May of the following year.
As of: January 2019
Do costs for furnishings under a dual household arrangement fall under the EUR 1,000 cap?
No. According to the BFH ruling of 04.04.2019 (VI R 18/17), expenses for furnishings and household items, including depreciation, do not count as accommodation costs within the meaning of § 9 Abs. 1 Satz 3 Nr. 5 Satz 4 EStG. They are deductible in full as other additional expenses of a dual household (doppelte Haushaltsführung) and qualify as work-related expenses, provided they are necessary.
As of: June 2019
Will the property tax reform lead to higher housing costs?
In principle, the reform is not intended to make housing more expensive. Since property values have generally risen over the decades, the federal government can counteract this through the tax assessment rate (Steuermesszahl), and municipalities are urged to adjust their multipliers (Hebesätze) accordingly. Nevertheless, an additional burden on tenants and owners, particularly in metropolitan areas, cannot be ruled out.
As of: August 2019
Does a first place of work apply to fixed-term employment relationships?
Yes. If the employee is to work at a fixed business location for the duration of the fixed-term employment, this constitutes a first place of work. If the employee is reassigned to another work location during the fixed term, the first place of work no longer applies, and the business travel rules apply again from that point onward.
As of: July 2019
Does the special expense deduction also apply to contributions withheld directly from the child's wages?
Generally yes, provided the parents have a maintenance obligation and actually reimburse the child for the withheld contributions. If the contributions are not refunded to the child in cash, only the child may claim the deduction in their own tax return.
As of: September 2019
Does the heirs' claim to compensation for unused leave also apply against private employers?
Yes. The ECJ clarified that heirs may rely directly on EU law, regardless of whether the employer is a public or private one. If national law excludes such compensation, EU law takes precedence.
As of: November 2018
Does the repeal of Section 8c (1) KStG also apply to trade tax?
Yes, the repeal is mirrored for trade tax purposes via Section 36 (2d) GewStG. Consequently, the trade tax loss carryforward is also preserved in cases of proportional share transfers. This ensures parallel treatment of corporate income tax and trade tax.
As of: November 2018
Does a patrol officer have a primary place of work at their police station?
Yes. In its ruling of 4 April 2019 (VI R 27/17), the BFH held that a patrol officer's primary place of work is the police station to which they are assigned under service regulations. It is sufficient that they perform paperwork and pre-shift briefings there; the fact that their main duties are in the field is irrelevant.
As of: July 2019
In which areas does digitalising accounting deliver the greatest productivity gains?
Key benefits arise from automated data transfer from upstream systems, simplified reporting, and new analytics from integrated data. Document management and interfaces/converters between different programs also improve. This reduces routine tasks and frees up capacity for analysis and advisory work.
As of: March 2017
Are driving lessons for licence classes B and C1 subject to VAT?
Yes, driving lessons for obtaining licence classes B and C1 are subject to VAT. The BFH confirmed this in its ruling of 23 May 2019 (V R 7/19), referring to the ECJ ruling of 14 March 2019 (C-449/17). Driving schools must therefore charge and remit the statutory VAT on their invoices.
As of: August 2019
Is the new regulation on the primary place of work constitutional?
Yes. The BFH has confirmed the reform of the travel expense rules as constitutional. The legislator did not exceed its regulatory discretion, since employees can adjust to the consistently same commuting routes and thereby reduce their travel costs.
As of: July 2019
Is retroactive funding under the Baukindergeld (Germany's child-related home ownership subsidy) possible?
Yes, retroactive funding back to 1 January 2018 is possible if the date of the notarised purchase agreement or the building permit falls within 2018. The application must still be submitted within three months after moving in.
As of: December 2018
Is fresh fruit provided to employees considered taxable wages?
No, providing fresh fruit at the workplace does not constitute taxable wages. It is treated for tax purposes in the same way as providing unfilled baked goods and hot beverages, and qualifies as a courtesy gesture by the employer.
As of: October 2019
Can the employer reimburse relocation expenses tax-free?
Yes. If the move is in the employer's particular business interest, the employer may reimburse tax-deductible relocation expenses free of wage tax and social security contributions. Such reimbursement is an alternative to claiming the costs as work-related expenses in your own tax return. We recommend raising this point during contract negotiations with the new employer.
As of: July 2019
Can parents deduct their child's health and long-term care insurance contributions as special expenses?
Yes, parents can claim the health and long-term care insurance contributions of their dependent child as their own special expenses (Sonderausgaben) for tax purposes. The prerequisite is an existing maintenance obligation toward the child. The deduction is made as part of the pension and insurance expenses (Vorsorgeaufwendungen) in the parents' income tax return.
As of: September 2019
Can heirs claim compensation for unused vacation of a deceased person?
Yes. According to a ruling by the ECJ dated 06.11.2018, a deceased employee's entitlement to financial compensation for unused paid annual leave generally passes to the heirs by way of succession. The heirs may demand financial compensation from the former employer for the outstanding vacation.
As of: November 2018
Does the official benefit-in-kind value for breakfast have to be applied if the employer only provides bread rolls and coffee?
No, the official benefit-in-kind value for breakfast does not need to be applied. According to BFH case law, this does not constitute a meal, so no taxable monetary benefit arises. Providing such items is considered a courtesy related to the design of the workplace.
As of: October 2019
Does the skilled labor shortage in healthcare justify a different assessment?
No. The BSG has expressly ruled that a skilled labor shortage has no bearing on the legal assessment of mandatory social insurance coverage. Social security rules may not be suspended merely to make a profession more attractive through higher pay relieved of social security contributions.
As of: June 2019
Is in-kind support sufficient to deduct a child's insurance contributions for tax purposes?
No, merely providing in-kind support (e.g., free board and lodging in the parental home) is not sufficient. In its ruling of 13 March 2018 (X R 25/15), the BFH held that parents must have actually paid or reimbursed the contributions to the child in order to deduct them.
As of: September 2019
Does a physician's high qualification as a higher-level service preclude mandatory social insurance coverage?
No. The BSG clarifies that the special quality of medical practice does not automatically exclude employment subject to social insurance. The decisive factor is solely whether the physician works under instructions and is integrated into the work organization.
As of: June 2019
Does the German ministerial draft provide for sanctions during the retroactive reporting period?
No, the German ministerial draft dated 30 January 2019 does not provide for sanctions for incorrect or omitted reporting of tax arrangements whose first implementation step occurs between 25 June 2018 and 1 July 2020. However, this does not protect against possible sanctions imposed by other Member States whose laws may also apply.
As of: July 2019
Are freelance doctors working in hospitals subject to social security contributions?
Yes. Under the BSG ruling of 4 June 2019 (B 12 R 11/18 R), freelance doctors working in a hospital are generally classified as dependent employees and are therefore subject to mandatory social security contributions. Self-employed status applies only in atypical exceptional cases. The decisive factor is their integration into the hospital's work organisation.
As of: June 2019
Are moving expenses also tax-deductible for private relocations?
For purely private relocations, no deduction as work-related expenses is possible; however, household-related services under § 35a EStG can be claimed. Eligible costs include labour and travel expenses of, for example, a moving company or tradesperson, but not material costs. The tax reduction amounts to 20 percent of the expenses, capped at EUR 4,000 per year on a maximum of EUR 20,000 in eligible expenses.
As of: July 2019
Are operating costs and electricity costs also included in the EUR 1,000 cap?
Yes. According to BFH case law (confirmed by ruling of 12 July 2017 – VI R 42/15), both warm and cold operating costs, including electricity costs, qualify as accommodation expenses and are therefore subject to the monthly cap of EUR 1,000.
As of: June 2019
Are unfilled bread rolls with a hot beverage considered breakfast for wage tax purposes?
No. The BFH ruled on 03/07/2019 (Az. VI R 36/17) that unfilled baked goods combined with a hot beverage do not constitute breakfast within the meaning of wage tax law. A typical component such as a spread or topping, which would be required even for a simple breakfast, is missing.
As of: October 2019
Under what conditions is the benefit-in-kind valuation waived for employee housing?
In high-cost metropolitan areas, a valuation discount applies: the benefit-in-kind assessment for employer-provided housing is waived if the rent paid, including utilities, amounts to at least two-thirds of the local customary rental value and that local customary rental value does not exceed EUR 20 per square meter excluding utilities.
As of: August 2019
Under what conditions can teaching services be VAT-exempt under § 4 Nr. 21 UStG?
Under § 4 Nr. 21 UStG, teaching services provided by private schools and other general or vocational training institutions are VAT-exempt if they directly serve educational purposes. A key requirement is a certificate from the competent state authority confirming that the institution properly prepares students for a profession or for an examination to be taken before a public-law body. Without this certificate, the exemption does not apply.
As of: August 2019
When may a received advance payment be derecognized through profit or loss?
The advance payment recognized as a liability may only be derecognized once the agreed service has been rendered and the receivable from the customer has therefore been realized. The advance payment is then offset against the receivable to be recognized, and the prepaid expense previously recognized for VAT is reversed without effect on profit or loss.
As of: September 2019
When does VAT arise on advance payments received?
Under accrual-based VAT taxation (Besteuerung nach vereinbarten Entgelten), VAT generally arises at the end of the pre-registration period in which the supply was rendered. However, if an advance payment is received before the supply is performed, VAT arises at the end of the pre-registration period in which the payment was received (minimum cash-basis taxation under § 13 Abs. 1 Nr. 1 lit. a sentence 4 UStG).
As of: September 2019
When is a relocation considered job-related?
A job-related reason exists if the move is connected to a change of workplace, for example when starting a career, relocating the company headquarters, or changing employers. A job-related reason is also recognized if the daily commuting time between home and the primary place of work is reduced by at least one hour. In this case, a change of city is not required, so moves within the same city may also qualify.
As of: July 2019
Why does the vacation entitlement continue to exist despite the employee's death?
The right to paid annual leave is enshrined in the Charter of Fundamental Rights of the EU and consists of two components: the time off for recreation and the payment during the leave. Even if the recreational component can no longer be realized after death, the financial entitlement remains and can be inherited.
As of: November 2018
Why does the German Federal Court of Auditors call for the complete abolition of the solidarity surcharge?
The Federal Court of Auditors sees significant constitutional and fiscal risks in only partially retaining the solidarity surcharge. Since the legal basis for the surcharge expires at the end of 2019 with the conclusion of Solidarpakt II, there is a risk that the federal government could be ordered to pay back billions in taxes—similar to the nuclear fuel tax case. A complete and prompt abolition would be more legally secure.
As of: June 2019
Why are tax firms introducing IT consultations before accepting new clients?
Digitalization is transforming data handover and requires coordinated technical processes. Before onboarding, the firm clarifies which systems, interfaces, and security standards the client has in place and how data exchange can be conducted efficiently and in compliance with GoBD (German Principles for Proper Bookkeeping in Electronic Form). Existing clients are also gradually integrated into this quality management approach.
As of: March 2017
Why is driving school instruction not classified as tax-exempt school and educational instruction?
The ECJ has ruled that driving school instruction does not constitute education within the meaning of Art. 132(1)(i) and (j) of the VAT Directive and therefore cannot be equated with traditional school and university instruction. Teaching driving skills is a specialised form of instruction that, on its own, does not meet the breadth and depth of general education required for a VAT exemption.
As of: August 2019
Why is Poland considered a cautionary example regarding implementation of the reporting directive?
Poland activated reporting obligations as early as 1 January 2019, introduced draconian penalties and broadened the scope of application. In addition, the individual advisor must be reported personally and provide a signature. This creates considerable uncertainty and is prompting companies to scale back their activities in Poland or to report everything as a precaution.
As of: July 2019
Why is the Soli not a suitable instrument for spreading income tax rates, according to the BRH?
The solidarity surcharge (Soli) was originally introduced to finance German reunification and is earmarked for that purpose. According to the Bundesrechnungshof (Federal Court of Auditors), if the government wants to achieve a greater spread of the income tax burden, the appropriate approach would be to adjust the income tax rate schedule itself, not to selectively retain the Soli for higher incomes.
As of: June 2019
Why must a prepaid expense (aktiver Rechnungsabgrenzungsposten) for VAT be recognised in the tax balance sheet?
Since the advance payment must be recognised as a liability at its full (gross) amount in the tax balance sheet, the VAT already to be remitted is initially recorded as an expense. To offset this, a prepaid expense (aktiver Rechnungsabgrenzungsposten) must be recognised as of the balance sheet date. It is released without affecting profit or loss once the underlying transaction is performed and the advance payment is offset against the receivable to be capitalised.
As of: September 2019
Why does the property tax (Grundsteuer) in Germany have to be reformed?
In April 2018, the Federal Constitutional Court (Bundesverfassungsgericht) ruled that the previous property tax was unconstitutional because it was based on outdated assessed values (Einheitswerte). In the former West German states, these values date back to 1964, and in the former East German states even to 1935. The legislator had to enact new rules by the end of 2019; otherwise, property tax could no longer have been levied.
As of: August 2019
Why should worthless shares be sold before the end of 2019?
As of 1 January 2020, the draft legislation (Section 20 (2) sentence 3 EStG draft) provides that the write-off or transfer of worthless shares will no longer qualify as a sale for tax purposes. As a result, losses from such transactions can no longer be offset against gains from other capital investments from 2020 onwards. Anyone anticipating a loss in value should therefore complete the sale by 31 December 2019 at the latest in order to use the loss for tax purposes.
As of: October 2019
Why was the pro-rata loss forfeiture under § 8c Abs. 1 KStG abolished?
In its ruling of 29 March 2017, the Federal Constitutional Court held that § 8c Abs. 1 KStG was incompatible with the Basic Law for share acquisitions between 1 January 2008 and 31 December 2015. In response, the legislator initially planned to abolish the rule only for this period. On 8 November 2018, however, the Bundestag decided to repeal the provision entirely and without replacement.
As of: November 2018
What does the opening clause in the property tax reform mean?
The opening clause is a compromise between the CDU/CSU and SPD that allows the federal states to deviate from the value-based federal model and apply an area-based model instead. This enables states to choose a simpler calculation based on land and building area.
As of: August 2019
What does DIN ISO 9001:2015 certification mean for a tax firm?
DIN ISO 9001:2015 is an internationally recognized standard for quality management systems. Certification confirms that a firm's internal processes are documented, regularly reviewed, and continuously improved. For clients, this means guaranteed process quality in handling their matters.
As of: October 2016
What exactly did the BFH decide in its ruling X R 25/15 of 13 March 2018?
The BFH ruled that parents may deduct contributions to statutory health and long-term care insurance withheld by their child's employer as their own special expenses (Sonderausgaben) only if they have actually reimbursed or paid these amounts to the child. Providing support in kind (Naturalunterhalt) does not satisfy this requirement.
As of: September 2019
What did the ECJ rule on 14 May 2019 regarding the recording of working time?
The ECJ ruled that EU Member States must require employers to systematically record the entire daily working time of their employees. Only in this way can compliance with maximum working hours and minimum rest periods, as well as the protection of employees' health, be ensured. Employers must therefore establish an objective, reliable and accessible time recording system.
As of: August 2019