The Cologne Fiscal Court, Az. 7-K-244/12, in its judgment of 17 April 2013, allowed the deduction of approximately €11,000 in tax advisory fees that arose in 2010 following a voluntary disclosure of investment income from years up to 2008. The best part: the saver's lump-sum allowance was still granted on top. Background: Since 2009, only the saver's lump-sum allowance of €801 per person per year may be claimed for interest and other investment income. Income-related expenses paid beyond this amount have had no tax effect since then. However, the tax office is unwilling to accept the favourable decision of the Cologne Fiscal Court and has filed an appeal with the Bundesfinanzhof. A decision now remains to be awaited. Our advice to anyone who has incurred higher income-related expenses in connection with income from capital assets: be sure to file an objection with the tax office, referring to case number BFH VIII R 34/13, and request that the proceedings be suspended until the BFH has ruled. We are happy to handle this for you. For existing clients, we will take care of it automatically.
Frequently asked questions
Frequently asked questions
Are tax advisory fees for a voluntary self-disclosure deductible as income-related expenses?
The Cologne Tax Court ruled on 17 April 2013 (Az. 7 K 244/12) that tax advisory fees of approximately €11,000 incurred in connection with a voluntary self-disclosure relating to capital income up to 2008 are deductible as income-related expenses in the year of payment (2010). In addition, the saver's lump-sum allowance could be claimed. However, the decision is not yet final, as the tax office has filed an appeal with the BFH.
Which income-related expenses are still deductible for investment income since 2009?
Since the introduction of the flat-rate withholding tax (Abgeltungsteuer) in 2009, only the saver's lump-sum allowance of €801 per person per year (€1,602 for joint assessment) is generally deductible for income from capital assets. Actual higher income-related expenses no longer have any tax effect. Whether tax advisory fees incurred in connection with a voluntary self-disclosure may be deducted additionally is the subject of BFH proceedings VIII R 34/13.
Under which case number is the BFH proceeding on the deduction of income-related expenses in connection with a voluntary disclosure pending?
The appeal against the ruling of the FG Köln dated 17 April 2013 (7 K 244/12) is pending before the Bundesfinanzhof under case number VIII R 34/13. The issue is whether Steuerberater (German Certified Tax Advisor) fees incurred for a voluntary disclosure relating to investment income may be deducted as income-related expenses alongside the saver's lump-sum allowance, despite the flat-rate withholding tax.
How should taxpayers proceed with high income-related expenses on capital income?
Taxpayers who incurred higher income-related expenses in connection with investment income should file an objection against the relevant tax assessment notice and refer to the case pending before the BFH under reference VIII R 34/13. At the same time, it is advisable to apply for a stay of proceedings pursuant to § 363 Abs. 2 AO until the BFH has issued its ruling. This keeps the assessment open, allowing a potentially favourable decision to be taken into account.