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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656 questions · Page 5 / 14
When does the tax exemption under § 3 Nr. 11 EStG apply to death benefits?
According to the BFH, a tax exemption under § 3 Nr. 11 EStG is only available for dependants in need of support. For heirs who are not in need of support, by contrast, the civil-service death benefit is fully taxable.
As of: September 2021
When is the gain from the sale of a property tax-free under § 23 EStG?
The capital gain is tax-free if the property was used exclusively for personal residential purposes between acquisition/completion and sale, or if it was used for personal residential purposes in the year of sale and the two preceding calendar years. Outside these cases, a sale within the 10-year speculation period is taxable as a private sale transaction.
As of: July 2023
When is electricity from a photovoltaic system tax-free?
If the generated solar power is used exclusively for personal consumption and not sold, no taxable income arises. However, in this case the option to reclaim input VAT on acquisition, maintenance, and repairs from the tax office is also forfeited.
As of: June 2021
When is input VAT deduction permitted for company events?
Input VAT deduction is only possible if the goods or services received are predominantly in the employer's business interest. According to the tax authorities, this is the case when the benefits qualify as minor gifts (Aufmerksamkeiten) within the meaning of § 3 Abs. 9a Nr. 2 UStG and therefore do not constitute a taxable supply to the employee.
As of: August 2023
When is the reduced tax rate more favorable than the Fünftelregelung (one-fifth rule)?
The reduced tax rate under § 34 Abs. 3 EStG is generally more advantageous when there is a high capital gain and the taxpayer already earns regular income at the top tax rate. In the example with EUR 200,000 in capital gains and EUR 50,000 in regular income, the savings amount to approximately EUR 40,970 compared with the Fünftelregelung. The Fünftelregelung, by contrast, is more favorable with lower regular income or when the reduced rate has already been used in prior years.
As of: June 2023
When is the co-leasing of operating equipment a VAT-exempt ancillary service?
An ancillary service exists when the operating equipment is specifically tailored to the building and serves exclusively the optimal contractual use. In the decided case, feeding, heating, and ventilation systems of a turkey barn qualified as ancillary services to the barn lease. The decisive factor is the economic unity of the overall service.
As of: September 2023
When is the tax-class combination IV/IV more favorable than III/V?
If the monthly wage of the lower-earning spouse exceeds the threshold amounts shown in the BMF tables (columns 2, 3, 5 or 6), the IV/IV combination generally results in a lower – or at least no higher – wage tax burden than III/V. The tables differentiate according to whether each spouse is covered by all or none of the branches of social insurance, and they apply only if the annual wage remains constant.
As of: May 2022
When can a Minijob alongside a main job benefit from preferential tax and social security treatment?
Only if the Minijob is performed for a different employer. Section 8 (2) sentence 1 SGB IV expressly permits a low-paid Minijob alongside main employment subject to social security contributions only with different employers. With the same employer, all jobs are aggregated.
As of: February 2023
When is a business exempt from the OSS procedure (de minimis threshold)?
Exempt are businesses established in only one EU member state whose net total of intra-Community distance sales and telecommunications, broadcasting, television and electronic services does not exceed €10,000 in either the current or the preceding calendar year. In this case, invoices must be issued with domestic VAT and reported to the competent tax office.
As of: June 2021
When is a loss from renting out a holiday apartment recognised for tax purposes?
A loss is recognised, among other conditions, if the actual rental period falls short of the locally customary rental period for holiday apartments by no more than 25%. If this threshold is exceeded, the tax office examines the intention to generate income separately and typically requires a 30-year surplus forecast.
As of: January 2021
When is a private sale of real estate tax-free?
Under § 23 Abs. 1 Nr. 1 Satz 3 EStG, a capital gain on the sale of real estate is tax-free if the property was used exclusively for the owner's own residential purposes between acquisition and sale, or in the year of sale and the two preceding years. Use by dependent children eligible under § 32 EStG is treated as equivalent to owner-occupation.
As of: October 2023
When is a full cost deduction for a home office possible?
An unlimited deduction is permitted if the home office constitutes the center of all business and professional activity (§ 4 Abs. 5 Nr. 6b S. 3 EStG). The decisive factors are qualitative: whether the activities that define the profession are carried out there. Where two workplaces are qualitatively equivalent, it depends on whether more than half of the working time is spent in the home office. For teachers, sales representatives, architects, and judges, a center of activity in the home office is ruled out.
As of: November 2021
When does paying relatives for childcare make sense from a tax perspective?
Since the taxpayer can only deduct two-thirds of the costs, while the caregiver must pay tax on the full income, there is regularly a tax gap of one-third. Such compensation makes sense when the caregiver's income remains below the basic tax-free allowance (Grundfreibetrag). In that case, the income stays tax-free and the taxpayer can still deduct two-thirds of the costs.
As of: May 2022
When is a late notification of the pension insurance exemption exceptionally justified?
A late submission is justified if the mini-jobber already receives a full old-age pension and is generally exempt from pension insurance. In these cases, missing the deadline does not delay the effect of the exemption.
As of: September 2022
When can a company use the extended trade tax deduction under Section 9 No. 1 Sentence 2 GewStG?
The extended deduction can be claimed upon application if the business exclusively manages and uses its own real estate. In this case, income from real estate management is fully exempt from trade tax. The rule ensures equal treatment with private letting and leasing, which is not subject to trade tax.
As of: March 2023
When can taxing the withdrawal gains be more advantageous than continuing the tax entanglement?
Immediate taxation can be beneficial if the commercial infection (gewerbliche Infizierung) lasted only a few years, so that hidden reserves have barely accumulated. With continued entanglement, the future tax burden tends to increase, and tax advantages such as the extended trade tax deduction or the 10-year speculation period remain unavailable.
As of: October 2023
When can a prepayment penalty be claimed as selling expenses?
If the sale of the property qualifies as a taxable private disposal under § 23 Abs. 1 Nr. 1 EStG (e.g., sale within the 10-year period without continuous owner-occupation), the prepayment penalty can be deducted as selling expenses when determining the gain. It thereby reduces the taxable capital gain from the disposal.
As of: February 2024
Wann kann ich ein häusliches Arbeitszimmer absetzen?
Ob und wie ein häusliches Arbeitszimmer abziehbar ist, hängt von der Nutzung ab. Die Infografik dazu finden Sie im Merkblatt-Verzeichnis unter "Arbeitszimmer ab 2023". (Quelle: Deubner Verlag)
When does the FG Münster reject the deduction for garden remodeling under § 33 EStG?
The FG Münster (judgment of 15 January 2020, 7 K 2740/18 E) ruled that a deduction under § 33 EStG is precluded if a terrace already exists at the rear of the house, thereby providing accessible garden access prior to the remodeling. In that case, the measures are no longer considered unavoidable. A final BFH ruling is still pending, so comparable cases should be kept open.
As of: June 2022
When does advertising on an employee's vehicle exceptionally not constitute wages?
Wages are not deemed to arise only if the operational business purpose of the advertising is clearly the primary objective. This requires that the contractual arrangement ensures the promotion of the advertising effect, for example through specific requirements regarding the promotional use of the vehicle as well as provisions on exclusivity or the permissibility of additional third-party advertising.
As of: February 2020
When does a tenant fixture qualify as a sham component (Scheinbestandteil)?
A sham component (Scheinbestandteil) exists when the tenant incorporates an asset into the building only for a temporary purpose. According to BFH case law, three conditions must be met: the ordinary useful life must exceed the actual useful life, removal must be expected based on the circumstances, and at the time of removal the asset must still have a fair value exceeding mere scrap value.
As of: July 2023
When is a child considered part of a single parent's household?
A child belongs to the household if registered at the single parent's address and intended to remain there permanently, or only temporarily absent (e.g. for vocational training or studies). In addition, the single parent must provide for the child's material and emotional well-being. If the child is registered in more than one household, the relief amount goes to the parent who receives the Kindergeld (child benefit).
As of: December 2021
When does a use for own residential purposes within the meaning of § 23 EStG apply?
A qualifying owner-occupied use exists if the property was used exclusively for the owner's own residential purposes between acquisition and sale, or at least in the year of sale and the two preceding calendar years. A sale following a move-out generally does not meet this requirement. As a result, the tax exemption within the 10-year holding period does not apply.
As of: August 2023
When does a classic Betriebsaufspaltung (business split) with trade tax consequences exist?
A Betriebsaufspaltung requires both a substantive and a personal interdependence. Where a corporation acts as the holding entity, it must hold a direct stake of more than 50% in the operating entity. In such cases, the activity qualifies as inherently commercial and precludes the extended trade tax reduction.
As of: June 2024
When does the tax authority consider studies to be full-time?
According to the BMF circular from 2020, full-time studies exist if the program serves to prepare for a profession and the student does not engage in gainful employment exceeding an average of 20 hours per week. Marginal employment within the meaning of the German Social Code is also permissible.
As of: June 2022
When is the disability lump-sum allowance more beneficial than the deduction of extraordinary expenses under § 33 EStG?
The lump-sum allowance is granted as an alternative to the deduction of extraordinary expenses under § 33 EStG and applies regardless of the actual costs incurred. It is advantageous when the recurring disability-related expenses do not exceed the reasonable individual burden defined in § 33 Abs. 3 EStG. Non-recurring extraordinary expenses may additionally be claimed as extraordinary expenses alongside the lump-sum allowance.
As of: November 2021
When are training costs deductible as income-related expenses?
Training costs are deductible as Werbungskosten (income-related expenses) if a completed initial vocational training (lasting at least 12 months and concluded with a final examination) already exists and the further training builds on it, for example a master's degree following a bachelor's. Costs incurred during training under an employment relationship (e.g. a dual study program or apprenticeship with wage payments) are also deductible as Werbungskosten during the initial training, since there is a direct connection with income from employment.
As of: August 2023
When are training costs deductible as work-related expenses (Werbungskosten)?
A deduction as Werbungskosten is possible for expenses related to a second or further course of training, as well as for an initial training that takes place within an employment relationship. The requirement is a sufficiently specific, objectively verifiable connection with future income. Current income does not yet need to be generated.
As of: February 2020
When must health insurance bonus payments be recorded for tax purposes?
Recognition follows the cash-flow principle under § 11 Abs. 1 EStG. Cash bonuses are recognized at the time of payment, in-kind bonuses at the time they are issued, and credits to a bonus account at the time they are credited.
As of: March 2023
When are services provided by a nursing home VAT-exempt under § 4 No. 16 UStG?
Services are only exempt if they are closely connected with the care and support of persons in need of assistance and are essential for providing the care service. Additional services that go beyond standard care do not fall under the exemption and are subject to the standard VAT rate.
As of: November 2023
When must rental costs for trade fair stands be added back for trade tax purposes?
An add-back under § 8 No. 1 lit. e GewStG only applies if the trade fair stand would notionally form part of the company's fixed assets. The decisive factor is whether the stand would be intended to serve the business operations on a lasting basis (§ 247 Abs. 2 HGB). If the stand is only rented occasionally and trade fair participation is not strictly necessary for distribution, no add-back applies.
As of: July 2022
When are payments to a school support association donations and when are they considered payment for services?
If the support association acts selflessly and is recognized as a non-profit organization, payments can be deducted as special expenses (Sonderausgaben) by means of a donation receipt. However, if the support association covers school operating costs that are not publicly funded, or if the school depends on these funds, the payment does not qualify as a donation but as a payment for services. In this case, only a deduction as school fees pursuant to § 10 Abs. 1 Nr. 9 EStG is possible.
As of: February 2024
When are extraordinary write-downs relevant during the coronavirus pandemic?
Extraordinary write-downs have become more important during the pandemic, as many businesses are facing lost revenue and inventory value losses due to missing customers. A typical example is seasonal goods in retail (e.g., winter clothing) that could not be sold because of lockdowns and have permanently lost value. The pandemic qualifies as an extraordinary event that justifies a corresponding write-down at the balance sheet date.
As of: April 2021
When are anticipated income-related expenses exceptionally deductible in cases of usufruct?
A deduction is possible if the end of the usufruct is concretely foreseeable and the new owner incurs the expenses recognizably in view of the upcoming personal use for generating income. Both conditions must be met cumulatively.
As of: October 2023
When are accommodation and meal expenses still deductible during a full-time educational program?
A deduction is only possible if a second household is maintained at the location of the course or studies due to the educational program. The business-travel rules do not apply, as the educational institution qualifies as the primary place of activity (erste Tätigkeitsstätte).
As of: October 2020
When is a taxpayer entitled to the disposal allowance under § 16 Abs. 4 EStG?
The EUR 45,000 allowance is granted if the taxpayer has reached the age of 55 or is permanently incapacitated for work within the meaning of social insurance law. It is granted only once in a lifetime and is reduced by the amount by which the capital gain exceeds EUR 136,000.
As of: November 2022
When does a tip paid to an employee lose its tax-exempt status?
The tax exemption no longer applies if the employer first retains the tip and decides on its distribution to employees. In this case, the tip is treated as taxable wages. Mandatory service charges are likewise not tax-exempt.
As of: May 2021
When was the obligation to file for insolvency suspended in connection with Corona aid?
The obligation to file for insolvency was suspended until 30 April 2021, provided that the company had applied for Corona aid between 1 November 2020 and 28 February 2021. Outside of this exception, the following still applies: in the event of illiquidity, the application must be filed within 3 weeks; in the event of over-indebtedness, within 6 weeks.
As of: April 2021
When do supplements in a Minijob become taxable?
Supplements become taxable if they are paid without an actual work performance being rendered. This typically applies to payments during the employment ban under maternity protection or during continued remuneration in case of illness. Once they are taxable, these supplements generally also lose their exemption from social security contributions.
As of: May 2022
When is an intent to generate income assumed in the case of a holiday apartment?
An intent to generate income is generally assumed when the holiday apartment is rented out or made available exclusively to changing holiday guests throughout the year and personal use is ruled out. This applies, for example, when the rental is delegated to an agency or tourist board and personal use is contractually excluded for the entire year. Additionally, if the landlord owns another apartment in the immediate vicinity, this further supports the absence of personal use.
As of: January 2021
When does the tenant become the economic owner of a tenant fixture?
The tenant becomes the economic owner when the landlord's claim for return of the installed assets at the end of the lease no longer has any economic significance. This is the case if the installed item will be technically or economically consumed during the expected lease term, or if the tenant can expect at least reimbursement of the fair market value at the end of the lease.
As of: July 2023
When will the statutory minimum wage be raised to €12 per hour?
On 23 February 2022, the German Federal Cabinet adopted a draft law under which the minimum wage will rise to €12 per hour effective 1 October 2022. The increase is intended to benefit primarily employees in marginal employment (Minijobs) and in low-wage occupations.
As of: March 2022
Why does the legislator treat public transport more favorably than cars or taxis?
With the transport-mode-independent distance allowance introduced on 1 January 2001, the legislator pursued environmental and transport policy goals. Use of scheduled public transport was no longer to be disadvantaged compared with the car. Since a taxi is used individually like a car and does not make a comparable ecological contribution, it is not granted privileged treatment.
As of: December 2022
Why did the BFH rule against a child benefit claim in the case of the Diplom-Finanzwirtin?
The BFH (judgment of 07.04.2022, III R 22/21) held that the subsequent law studies did not constitute the continuation of a single initial training, but rather a second course of education pursued alongside employment. Although there was a close temporal and substantive connection, the professional activity within the tax administration took precedence, particularly due to the long-term commitment to the employer. In addition, the employment exceeded the 20-hour threshold under § 32 Abs. 4 S. 2 EStG.
As of: June 2023
Why are tenant compensation payments not covered by § 6 Abs. 1 Nr. 1a EStG?
The BFH limits the scope of this provision to structural measures on the building itself. Tenant compensation payments are only indirectly connected to the renovation work and are typically paid before the actual construction measures begin. As a result, both the substantive and temporal link to the repair and modernization measures is missing.
As of: April 2023
Why does paying out several years of overtime without the one-fifth rule lead to a higher tax burden?
German income tax is progressive, meaning the tax rate rises as taxable income increases. If overtime compensation earned over several years is paid out in a single year, it sharply increases annual income and is subject to a higher marginal tax rate. Without a preferential tax treatment, this results in a disproportionately high tax burden.
As of: March 2022
Why are research awards classified as income from employment?
Income from employment comprises all goods, whether in money or money's worth, that accrue to the taxpayer on the basis of their employment relationship. Since a habilitation enhances professional qualifications and career prospects, particularly for a professorship, it serves to secure future income. Research funding granted for this purpose is therefore professionally motivated and taxable.
As of: August 2022
Why is the business cessation under § 16 Abs. 3b EStG not deemed an act of the decedent?
Even though the cessation declaration has retroactive tax effect to the date of death, it is based on a decision made by the heirs after the inheritance occurred. The decedent did not cease the business but merely leased it out, so the tax-triggering act is attributable to the heirs.
As of: October 2023
Why is a cafeteria not considered essential for nursing services?
Since residents already receive breakfast, lunch and dinner as well as dining rooms on the wards, the cafeteria merely represents an additional offering. It also serves relatives and visitors and is therefore dispensable for the actual nursing and care services.
As of: November 2023
Why is the book value, rather than the fair market value, decisive in a tax-neutral withdrawal?
The BFH reasons that in a tax-neutral withdrawal, the hidden reserves were not realized and taxed within the business. Valuing the asset at fair market value would mean these reserves remain permanently untaxed. Consequently, for purposes of § 23 EStG, the book value must also serve as the acquisition cost, ensuring that the hidden reserves are captured upon a subsequent sale.
As of: July 2022