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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Why was a simplified model for inheritance and gift tax proposed?
The background is the decades-long debate about the constitutionality of the inheritance and gift tax. On 27/09/2012, the BFH ruled the tax to be unconstitutional and referred the matter to the Federal Constitutional Court (Az. 1 BvL 21/12). In response, the Bundesverband der Steuerberater (BVStB) presented a simplified, enrichment-oriented model for public discussion on 17/06/2013, which largely dispenses with complex valuation issues.
As of: August 2013
Why was a shortening of the retention periods pursued?
The reduction is intended to cut red tape and provide financial and organizational relief, particularly for businesses. Storing extensive paper and data archives generates significant costs, which shorter retention periods aim to reduce.
As of: April 2013
What do yellow and white index cards mean in the context of transferring the register of wills?
Yellow index cards are custody notices regarding documents relevant to succession; around 3 million of these have been digitised. White index cards contain notifications about children born out of wedlock or individually adopted; approximately 1.4 million of these have been recorded. Both types are digitally transferred from the registry offices to the Central Register of Wills during the migration process.
As of: December 2014
What does 'accommodation away from home' mean under § 33a Abs. 2 EStG?
There must be a physical separation between child and parents, with the child living independently. Eligible arrangements include the child's own apartment, shared flats, or student dormitories. The child must provide for their own meals, and the accommodation must be intended for a certain duration (e.g. semester, training year).
As of: December 2021
What does 'living apart together' mean in a tax law context?
'Living apart together' describes couples in a committed relationship who deliberately maintain separate residences. The FG Münster has recognized that this lifestyle is common today and that the personal and intellectual partnership can be sustained despite physical separation – with the consequence that joint tax assessment (Zusammenveranlagung) remains possible.
As of: March 2017
What does 'normal gross yield' mean in the context of property tax remission?
The normal gross yield is the estimated, customary gross rent that could be achieved for the property at the beginning of a calendar year. It serves as a benchmark for assessing the actual reduction in income and determining the amount of the remission.
As of: March 2014
What does 'purpose-related compensation' mean in the context of the reduced tax rate for overtime?
The payment must be made for a specific reason that justifies the lump-sum compensation – typically the termination of the employment relationship. An arbitrary or routine bulk payment is not sufficient. Only if the underlying reason explains the one-time payment do the overtime payments qualify as extraordinary income within the meaning of § 34 EStG.
As of: March 2022
What does identity of ownership mean in partnerships?
Identity of ownership exists when exactly the same individuals or legal entities hold interests in both partnerships. If a person is a partner in only one of the two entities, identity of ownership is lacking and a book value transfer is not possible.
As of: December 2024
What does the exemption limit (Freigrenze) mean for company events?
An exemption limit (Freigrenze) means that even a single cent in additional expense per employee causes the entire amount to become subject to tax and social security contributions. Therefore, it is not just the excess portion that is taxed, but the complete benefit.
As of: October 2014
What does cash reconciliation capability (Kassensturzfähigkeit) mean in practice?
Cash reconciliation capability means that the cash balance shown in the books must match the actual cash physically present in the till at any given time. The business owner must therefore be able to perform a target-actual comparison of the cash register at any moment without any discrepancies arising.
As of: May 2016
What does bogus self-employment (Scheinselbständigkeit) mean?
A person is considered bogusly self-employed if they outwardly act as an independent contractor, but their actual activities correspond to those of an employee. The decisive factor is an overall assessment of the working conditions, not the formal designation in the contract. If bogus self-employment exists, social security contributions are mandatory as in a regular employment relationship.
As of: September 2016
What does deferred taxation of employee equity participations mean?
The non-cash benefit arising from the free or discounted transfer of company shares is not taxed at the time of transfer. Taxation is deferred to a later point, such as the sale of the shares, termination of employment, or expiry of a statutory time limit.
As of: December 2024
What does the expiry of the transition period for old cash registers at the end of 2016 mean?
A transitional rule from 2010 expires at the end of this year. It affects cash registers that do not allow individual record-keeping or data export. Business owners using such devices should arrange the purchase of a new, legally compliant cash register system in good time.
As of: April 2016
What does the BFH ruling VI R 7/21 mean for seniors with a home emergency call contract?
Seniors who use a classic home emergency call contract with device provision and an external 24-hour call center without on-site response cannot claim the costs as a household-related service under § 35a EStG. The tax office will reject such expenses in the income tax return. A review is only worthwhile for contract models that differ from this standard setup.
As of: May 2023
What does the BSG ruling mean for Rechtsanwälte (German Attorneys-at-Law) who commission a web designer on a one-off basis?
If a web designer is commissioned on a one-off basis to create a law firm website, no artists' social security contribution (Künstlersozialabgabe) is payable – even if the fee exceeds the EUR 450 threshold. The prerequisite is that no further artistic or journalistic assignments are commissioned within the audit period.
As of: August 2022
What does the non-application decree issued by the BMF on 20 December 2011 mean for taxpayers?
With the non-application decree of 20 December 2011, the tax administration responded to the BFH ruling of 12 May 2011 and refuses to generally recognise civil litigation costs as extraordinary expenses (außergewöhnliche Belastung). As a result, the Finanzamt typically does not accept such costs. Affected taxpayers should file an objection against rejection notices and refer to the pending BFH proceedings in order to benefit from a suspension of the procedure.
As of: April 2013
What does the planned zero VAT rate for PV systems mean?
A VAT rate of 0% is to apply to the supply, intra-Community acquisition, import and installation of PV systems and their components (e.g. storage units). This applies to systems on or near private dwellings, apartments, and public or community-serving buildings. For an installed gross capacity of up to 30 kW (peak), the requirements are automatically deemed to be met.
As of: October 2022
What does the offsetting effect of the commuter allowance mean for employees?
Due to the offsetting effect, employees generally cannot claim any additional actual vehicle costs beyond the flat rate of EUR 0.30 per kilometer of distance. Even unexpected and high expenses related to the commute to work are, in principle, covered by this allowance. However, a careful case-by-case review remains advisable, particularly in the event of accidents.
As of: November 2014
What does the Top-Steuerberater award by Focus Money mean?
The Top-Steuerberater award by Focus Money is based on a test that includes demanding technical questions, among other criteria. It therefore reflects a proven high level of expertise at the awarded firms and is granted in the form of a seal.
As of: August 2009
What does the Focus Money Top Tax Advisor award mean?
Focus Money evaluates tax advisory firms each year and recognises the leading practices across various size categories. A repeated award is considered an indicator of consistent quality, professional expertise and client satisfaction. It can serve clients as guidance when selecting a Steuerberater (German Certified Tax Advisor) firm.
As of: June 2024
What does DIN EN ISO 9001 certification mean for a tax firm?
DIN EN ISO 9001 is an internationally recognized standard for quality management systems. For tax firms, it confirms that tax services and firm management meet standardized quality requirements. It is an industry standard among mid-sized and large firms.
As of: January 2011
What does the dynamic adjustment of the income threshold for the bAV (occupational pension) subsidy mean?
By linking it to the contribution assessment ceiling, the income threshold for the low-income earner subsidy will automatically rise in the future. As a result, employees no longer lose eligibility simply due to regular wage increases. This creates greater planning certainty for both employers and employees with regard to occupational pension schemes (bAV).
As of: December 2024
What does the requirement of 'reasonable costs' mean for conversion measures?
Reasonable costs are those that are customary and necessary for age-appropriate or disability-appropriate equipment. Luxurious features or those exceeding what is medically necessary are not recognized for tax purposes. The benchmark is the average expense for a comparable barrier-free solution.
As of: November 2019
What does the requirement of not having been in difficulty as of 31 December 2019 mean?
Under the EU definition, a company is considered not to be in difficulty if, as of the reference date of 31 December 2019, its principal bank was not aware of any unsettled payment arrears exceeding 30 days. Only such companies are eligible to apply for KfW Corona assistance. In addition, at the time of application a positive going-concern forecast must exist, assuming a normalization of the situation.
As of: March 2020
What does the referral to the Federal Constitutional Court mean for taxpayers?
Until the Federal Constitutional Court issues its decision, it remains open whether the solidarity surcharge is in fact unconstitutional. In the meantime, taxpayers may consider keeping their assessment notices open with respect to the solidarity surcharge or filing an appeal in order to benefit from a possible ruling. This is already the second referral on this matter submitted by the Lower Saxony Tax Court.
As of: August 2013
What does the revised BFH case law mean in practice for married couples working from home?
Married couples who share a home office can now deduct up to €2,500 per year instead of the previous combined limit of €1,250. The condition is that each spouse individually meets the deduction requirements, meaning each must have their own workspace in the room and actually work there to a corresponding extent.
As of: March 2017
What does the unannounced cash register inspection from 2018 onwards mean for businesses with cash transactions?
Since 01/01/2018, tax authorities have been permitted to inspect businesses with cash transactions during regular business hours without prior notice. Anonymous test purchases by inspectors beforehand are also permitted. Businesses should keep all cash register-related organizational documents readily available, including operating manuals as well as programming and setup logs.
As of: November 2017
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 a provisional notice regarding the home office mean?
If the tax assessment contains a provisional notice (§ 165 AO) concerning the home office, the assessment will be automatically amended in the taxpayer's favor following a constitutional ruling. A separate application is not required, as the tax office implements the adjustment ex officio.
As of: July 2010
What does a unified contract structure mean for real estate transfer tax?
A unified contract structure (einheitliches Vertragswerk) exists when the purchase of land and the construction of a building are treated as a single economic transaction. In this case, real estate transfer tax applies not only to the land value but also to the construction costs, including VAT. This significantly increases the tax base.
As of: January 2018
What does ISO 9001 certification mean for a tax consultancy?
Certification under DIN EN ISO 9001 ff confirms that the firm has established a documented quality management system for its tax services and firm management. It covers standardized processes, defined responsibilities, and regular reviews by external auditors. For clients, this means transparent workflows and reliable service quality.
As of: August 2009
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 is a so-called 'company burial' (Firmenbestattung) within the meaning of BFH case law?
A Firmenbestattung refers to arrangements in which a GmbH is deliberately diverted from proper insolvency proceedings, for example by transferring shares to an untraceable acquirer, simultaneously replacing the managing director, and transferring business assets to third parties. The typical aim is to disadvantage creditors. Where such a Firmenbestattung exists, the underlying resolutions may be void, with the result that the original managing director remains in office and continues to be liable.
As of: November 2014
What does gross negligence mean in insurance law?
Gross negligence exists when the standard of care required in the circumstances is disregarded to a particularly high degree. This requires both an objectively serious breach of due care and subjectively inexcusable misconduct by the person acting. In cases of gross negligence, insurance benefits may be reduced or denied.
As of: November 2012
What does deferred taxation of pensions mean?
Under deferred taxation, contributions to retirement provision are tax-relieved during the savings phase, while the resulting pension must be taxed during the payout phase. This principle was introduced in Germany on 1 January 2005. The transitional period until full deferred taxation applies spans 35 years.
As of: November 2014
What does Section 13b UStG mean and how does the reverse-charge procedure work?
Section 13b of the German VAT Act (UStG) governs the shift of the VAT liability to the recipient of the supply. The supplier issues the invoice without VAT, and the recipient must remit the VAT directly to the tax office. Typically, the result is a zero balance, as the VAT remitted can be deducted as input VAT in the same preliminary return.
As of: June 2014
What does overcompensation mean in the context of Corona emergency aid, and what are its consequences?
Overcompensation occurs when the applicant has received more in subsidies than the actual loss incurred, i.e. the revenue shortfall caused by the Corona crisis minus any saved costs. The excess amount must be repaid. At the end of the approval period, all recipients are contacted and must document the use of the funds using a standard form.
As of: May 2020
What does the cash-flow principle mean for extraordinary expenses?
The cash-flow principle under § 11 Abs. 2 EStG states that expenses are recognized for tax purposes in the calendar year in which they were actually paid. For extraordinary expenses, this means that even very large one-off payments cannot be spread over several years, even if they exceed the taxpayer's total income.
As of: August 2015
What does the cash-basis principle (Zufluss-/Abfluss-Prinzip) under §11 EStG state?
Under §11 EStG, income and expenses are generally recognized for tax purposes in the calendar year in which they are actually received or paid. The decisive factor is the actual payment date, not the economic period to which the transaction relates. This rule governs the timing of cash flows for tax purposes.
As of: February 2022
What does the BMF restructuring decree state?
The restructuring decree (Sanierungserlass) of the Bundesministerium der Finanzen provided that profits arising from creditors' waiver of claims in the course of a corporate restructuring (restructuring gains) could be granted tax relief. On this basis, the tax authorities were able to defer or waive taxes on such restructuring gains. However, the Grand Senate of the BFH rejected the decree by ruling of 28 November 2016, holding that it violated the principle of administrative legality.
As of: October 2017
What does the 6-year holding period under § 6b EStG require?
Under § 6b EStG, hidden reserves from the sale of fixed assets may only be transferred to replacement assets if the asset sold belonged uninterruptedly to the fixed assets of a domestic permanent establishment for at least 6 years. According to BFH case law, the asset must have been part of the business assets of the selling taxpayer itself, not merely of any domestic permanent establishment.
As of: August 2022
What does the grandfathering rule for employees earning EUR 450.01 to EUR 520 stipulate?
Employees who were previously subject to mandatory insurance with earnings between EUR 450.01 and EUR 520 remain subject to mandatory health, long-term care, and unemployment insurance until 31 December 2023 under grandfathering provisions. Grandfathering does not apply to pension insurance; here, employees automatically switch to the flat-rate accounting for marginal employment as of 1 October 2022.
As of: September 2022
What is the purpose of the trade tax reduction for real estate under § 9 No. 1 GewStG?
The reduction is intended to mitigate or avoid the double taxation of real estate with both property tax (Grundsteuer) and trade tax (Gewerbesteuer). Since both are real taxes (Realsteuern), the same real estate would be taxed twice without this provision. § 9 No. 1 GewStG therefore provides for a simple reduction and an extended reduction.
As of: March 2023
What are the benefits of filing an application for wage tax reduction (Lohnsteuerermäßigung)?
An application for wage tax reduction (Antrag auf Lohnsteuerermäßigung) allows allowances to be entered for the monthly wage tax deduction. This increases your monthly net salary because your employer withholds less wage tax. Otherwise, any overpaid wage tax is only refunded after filing your income tax return in the following year.
As of: February 2014
What does the commuter allowance of EUR 0.30 per kilometer cover?
According to the BFH, the commuter allowance covers all ongoing vehicle costs for trips between home and the primary place of work. This includes, in particular, fuel, insurance, maintenance, and repairs. Claiming these costs additionally as work-related expenses is therefore generally not permitted.
As of: November 2014
What does the KöMoG enable partnerships to do?
Under the Act to Modernize Corporate Income Tax Law (KöMoG) of 21 May 2021, partnerships and professional partnerships can elect to be taxed as a corporation. Instead of the partners' individual income tax (transparency principle), the total profit is then subject to 15% corporate income tax. The aim is to improve international competitiveness.
As of: July 2021
From 2025, what qualifies as an electronic invoice under the German VAT Act (UStG)?
From 2025, an electronic invoice (eRechnung) is defined exclusively as an invoice in a structured electronic format that complies with the European standard EN 16931 and the syntaxes of Directive 2014/55/EU, and that can be received and processed digitally. Proprietary formats (e.g. EDI) remain permissible, provided the mandatory information can be extracted into an EU-compliant format. A PDF invoice sent by email therefore no longer qualifies as an electronic invoice, but rather as an 'other invoice' (sonstige Rechnung).
As of: November 2023
What qualifies as a token of appreciation (Aufmerksamkeit) under VAT law?
Tokens of appreciation are non-cash gifts of up to EUR 60 given to an employee on a special personal occasion such as a birthday or wedding, for example flowers or small luxury items. Beverages and small luxury items provided free of charge at the workplace also fall into this category. Such gifts do not constitute a significant enrichment of the employee and entitle the employer to input VAT deduction.
As of: August 2023
What qualifies as vocational training for purposes of the Ausbildungsfreibetrag (training allowance)?
Vocational training covers the acquisition of practical and theoretical skills for subsequent professional activity, typically concluded by a written and, where applicable, oral examination. This includes both classical apprenticeships and university studies within the meaning of § 32 Abs. 4 Nr. 2a EStG.
As of: December 2021
What qualifies as non-negligible private use of an ancillary room?
Non-negligible private use exists when the room is regularly also used for private purposes, such as a bathroom, kitchen, or hallway in a private residence. In such cases, a reasonable allocation between business and private use is not possible, so the costs are entirely non-deductible.
As of: June 2016