A circular issued by the OFD Frankfurt (Az. S 2297b A-1St 222) introduces a simplification rule for the flat-rate taxation of income tax on benefits in kind. Under § 37b EStG, the relief that applies to employees for benefits in kind up to EUR 40 (R 19.6 LStR 2011) is now to apply equally to benefits granted by the taxpayer to third parties. By analogy, mere tokens of appreciation whose value does not exceed EUR 35 (net) — for example, given to a customer on a personal occasion — should no longer be included in the assessment base for the flat-rate tax. In practice, this means that when the option is exercised, the costs of the flat-rate tax will no longer apply to small gifts such as bouquets of flowers, bottles of wine or similar items that a business owner gives to customers on their birthday. The new approach also creates legal certainty in cases where the option was not exercised. Going forward, the tax authorities should refrain from issuing control notices during tax audits for benefits up to EUR 40. Following consultation with the BMF, this simplification has been agreed between the federal government and the federal states and therefore applies nationwide. For a final clarification as to whether the rule also applies to gifts to business contacts, the BFH is currently dealing with a pending appeal proceeding, Az. VI R 56/11. For our external bookkeepers, we have provided posting instructions with clear explanations on "gifts & co." via your login.
Frequently asked questions
Frequently asked questions
Are gifts to business associates up to EUR 35 subject to the flat-rate tax under Sec. 37b EStG?
According to the circular issued by the OFD Frankfurt (Az. S 2297b A-1St 222), mere tokens of appreciation given to third parties up to a net value of EUR 35 do not have to be included in the assessment base for the flat-rate tax under Sec. 37b EStG. This applies the EUR 40 threshold for employees (R 19.6 LStR 2011) by analogy to gifts to business associates. The simplification has been coordinated nationwide between the federal government and the German states.
Which typical small gifts benefit from the simplification rule?
Covered are classic tokens of appreciation such as bouquets of flowers, bottles of wine or similar small gifts that an entrepreneur presents to a client on a personal occasion such as a birthday. Provided the net value does not exceed EUR 35, the flat-rate tax does not apply to such gifts.
What is the significance of this rule for tax audits involving non-cash gifts?
If the option to apply flat-rate taxation under § 37b EStG has not been exercised, the simplification creates legal certainty. For gifts of up to EUR 40, the tax authorities are no longer required to issue control notifications, meaning such transactions remain uncritical during tax audits.
Has the analogous application of the EUR 40 threshold to business associates been conclusively settled?
A final clarification is still pending. The BFH is addressing this question in a pending appeal under case no. VI R 56/11, namely whether the rule also applies to gifts to business associates. Until then, the administrative view coordinated between the federal government and the federal states applies.
On which provision is the transfer of the EUR 40 threshold to gifts to third parties based?
The simplification is based on an analogy to R 19.6 LStR 2011, which provides preferential treatment for non-cash benefits to employees up to EUR 40 as mere courtesies. This wage tax rule is extended via the circular of the OFD Frankfurt to gifts made by the taxpayer to third parties within the scope of § 37b EStG.