According to a recent ruling by the Münster Tax Court of 9 August 2016, case no. 13 K 3218/13 L, expenses for employee training paid by the employer do not constitute taxable wages.
Facts of the case:
The drivers of a company specialising in special and heavy haulage transport were required by statutory provisions to undergo training at certain intervals. The employer covered the training costs for its employees (which the company was also obliged to do under collective bargaining agreements).
The tax office sought to reclassify the training costs assumed by the employer as taxable wages for the employees and held the employer liable for the wage tax amounts incurred.
The transport company filed suit against the tax office, arguing that assuming the costs was in the employer's own operational interest.
Ruling of the Münster Tax Court:
The tax court upheld the claim in full, agreeing that the assumption of costs was in the employer's own operational interest.
Frequently asked questions
Frequently asked questions
Are training costs paid by the employer considered taxable wages?
No. If the training is predominantly in the employer's business interest, the costs assumed do not constitute taxable wages for the employees. This was confirmed by the Finanzgericht Münster in its ruling of 09.08.2016 (Az. 13 K 3218/13 L). Accordingly, neither wage tax nor social security contributions apply.
When does an employer have a predominant business interest in covering training costs?
A predominant business interest exists in particular when the employee is required to undergo training under statutory or collective bargaining provisions and the employer needs the qualification for the performance of the work. A typical example is drivers in heavy haulage who must complete regular mandatory training. In such cases, covering the costs primarily serves the business and does not constitute remuneration.
What are the consequences if the tax office reclassifies training costs as wages?
If the assumption of costs is treated as wages, the tax office will assess back wage tax and typically hold the employer liable via a liability notice (Haftungsbescheid). In addition, social security contributions may become due. Employers should therefore document that the training is required by law or collective agreement and was prompted by operational needs.
What did the Münster Tax Court rule on mandatory training for professional drivers?
On 09 August 2016 (Az. 13 K 3218/13 L), the FG Münster ruled that an employer's assumption of the statutorily required training costs for drivers of a special and heavy transport company does not constitute taxable wages. The employer was also obliged under the applicable collective bargaining agreement to cover these costs. The court fully upheld the claim against the wage tax liability notice.