To support exceptional talent, foundations in Germany and the EU offer various scholarship programmes. These are intended to provide financial support and thus create an incentive for students to fully realise their performance potential. The following explains which scholarship payments can be received tax-free and which conditions must be met for a tax exemption.
To enhance the attractiveness of a scholarship payment, it is exempt from tax under § 3 Nr. 44 EStG. However, several conditions must be met for this tax exemption. The requirements are that the scholarship originates from public funds, that there is no obligation to provide a specific service in return or employment-related performance, and that the scholarship does not exceed the amount required to carry out research tasks or to cover living expenses.
Review of tax exemption by the tax offices
The tax office responsible for the corporate income tax assessment of the scholarship provider must also examine whether a scholarship can be left tax-free in accordance with the requirements of § 3 Nr. 44 EStG. A review is carried out if the scholarship recipient requests such a review from the aforementioned tax office or from their local tax office. The recipient ultimately receives a certificate confirming that the requirements of § 3 Nr. 44 EStG have been reviewed and that the scholarship payment is either taxable or tax-exempt. It is important to note that the assessment of such a tax exemption is binding on the tax office, meaning no further review by the tax office may take place. Furthermore, such a review is only possible for domestic scholarship providers.
What should be considered for scholarships from the EU?
To ensure that German scholarship payments are not given preferential treatment, scholarships from other EU countries must also be granted tax exemption. At least where the requirements of § 3 Nr. 44 EStG are met and the scholarship provider complies with the German non-profit law requirements. To meet the non-profit law requirements, the scholarship recipient is obliged to submit extensive supporting documentation to their local tax office. This includes, for example, the statutes, areas of activity, financial reports, etc.
How high may scholarships be?
In a BFH ruling (BFH ruling of 24 February 2015, VIII R 43/12), it was established that the appropriateness of the scholarship amount should not be based on the current BAföG rates, but rather on the individual circumstances of the scholarship recipient. This includes age, academic background and the cost of living typically expected in such a situation. The last salary received before the scholarship can serve as a point of reference.
No obligation to perform employment-related services
In the proceedings before the FG Berlin-Brandenburg, the plaintiff received a teaching scholarship of EUR 500 per month from the 3rd semester of her master's degree onwards. In return for the financial support, she committed to working as a teacher in Berlin for at least 3 years. According to the view of the FG Berlin-Brandenburg (judgment of 30 March 2022, 16 K 2083/20), the tax exemption under § 3 Nr. 44 EStG therefore does not apply. The prerequisite was that the scholarship recipient must not be obliged to provide any specific academic or artistic service in return or to perform any other employment-related activity. However, since the plaintiff was contractually obliged to work as a teacher in Berlin for at least 3 years following successful completion of her studies, the requirements of § 3 Nr. 44 EStG are not met. The FG Berlin-Brandenburg consequently ruled that the scholarship received constitutes taxable income. An appeal is pending before the BFH.
Frequently asked questions
Frequently asked questions
Under what conditions are scholarships tax-exempt under § 3 No. 44 EStG?
Scholarships are tax-exempt under § 3 No. 44 EStG if they are funded from public sources, do not require a specific scientific, artistic, or employee-like service in return, and do not exceed the amount necessary to carry out the research task or cover the recipient's living expenses. All conditions must be met cumulatively.
How does the tax office verify the tax-exempt status of a scholarship?
The review is initiated upon application by the scholarship recipient, either at the tax office responsible for the corporate income tax assessment of the scholarship provider or at the recipient's local tax office. The recipient receives a binding certificate confirming the taxable or tax-exempt status. A subsequent re-examination by the tax office is then precluded. However, this procedure is only available for domestic scholarship providers.
Are scholarships from other EU countries tax-free in Germany?
Yes, scholarships from other EU countries are generally also tax-free, provided the requirements of § 3 Nr. 44 EStG are met and the foreign grantor complies with German non-profit law standards. The recipient must submit extensive documentation to their local tax office, including the grantor's statutes, areas of activity, and financial reports.
How is the appropriate amount of a tax-free scholarship determined?
According to the BFH ruling of 24 February 2015 (VIII R 43/12), the decisive factor is not the BAföG rates but the individual circumstances of the scholarship recipient. Relevant aspects include age, academic background, and typical living expenses. The salary earned immediately before the scholarship may also serve as a reference point.
Does the tax exemption cease to apply if the scholarship is tied to a subsequent employment obligation?
Yes. The Tax Court of Berlin-Brandenburg (judgment of 30 March 2022, 16 K 2083/20) ruled that the tax exemption under § 3 Nr. 44 EStG does not apply if the recipient is obliged to take up employment for a specified period after completing their studies. In the case at hand, a teacher trainee was required to work as a teacher in Berlin for at least three years. An appeal is currently pending before the BFH.