- If the Distance is too Short for Double Housekeeping
- Input Tax Refund Procedures: Submit Applications by 30 September 2024
- Sales Tax: How Donations in Kind are Treated
- Wage Tax: Home Office Generally does not Constitute a “Permanent Establishment” of the Employer
- Salary-Benefit: How to Save a Lot of Tax with a Job Bike
- Inflation Compensation Premium: Tax-Free Payment is Still Possible Until the End of 2024
- If the Distance is too Short for Double Housekeeping
Even though the home office plays an important role in many industries, the labor market expects a certain degree of flexibility. However, sometimes the distance between home and the workplace is too great to commute every day. In this case, it is often easier to rent a flat around the place of work. The costs of this can be recognized as income-related expenses up to a certain limit.
The interesting question is: How far does the distance to the main residence have to be? The Münster Tax Court (FG) had to rule on such a case recently.
The plaintiffs were a husband and wife who have a joint household in city S. The plaintiff has been the managing director of “H” GmbH & Co KG in city E since August 2018. The distance between the home in city S and the workplace in city E is 30 km. In February 2020, the plaintiff rented a second home in city E approximately 1 km from his place of work. He had previously rented a holiday flat in city D. Among other things, he claimed the rental costs in city D and city E, relocation costs from city D to city E and other costs associated with these flats. He also had a company car at his disposal, also for the use of private journeys. Private use was taxed according to the 1% rule. The tax office did not recognize the costs claimed for double housekeeping. It was reasonable to expect the claimant to travel the distance between his main residence and place of work by car every day.
The appeal lodged with the tax court was also unsuccessful. The conditions for double household management were not met. In the opinion of the Senate, the location of the plaintiff’s own household and his place of work are not separate. According to the Google Maps route planner, the plaintiff could reach his place of work in city E from his home in city S, which is approximately 30 km away, by car within 50 to 55 minutes in commuter traffic. This also corresponds to the information provided by the plaintiff.
Since the usual journey times are decisive, it should not be considered that, according to the plaintiff, the journey time was occasionally longer in individual cases due to road maintenance work. Outside of rush hour traffic, the journey time according to the Google Maps route planner was only about 30 minutes. On this, it does not matter how long it takes to travel by public transport. The plaintiff had in fact used the company car for all journeys, including the short distance between his second home and his place of work.
- Input Tax Refund Procedures: Submit Applications by 30 September 2024
Under certain conditions, EU member states reimburse domestic companies for the VAT (input tax) paid in connection with their activities in a Member State where they do not habitually supply goods or services (and are thus not required to register there for VAT).
To request a refund, claimants must send an electronic refund claim to their respective national tax authorities, who will confirm the claimant’s identity, VAT identification number and the validity of the claim. The request will then be forwarded to the Member State where the VAT was incurred. The applications for 2023 must be submitted by 30 September 2024 via the online portal of the Federal Central Tax Office.
- Sales Tax: How Donations in Kind are Treated
In addition to money, goods can also be donated, such as items with minor defects. In its FAQ, the Federal Ministry of Finance has listed how donations of goods should be treated from the donor’s point of view. We show you what to look out for when accepting donations in kind. Point out to your donors that donations in kind are subject to VAT as a “gratuitous transfer of value” if the item entitles the entrepreneur to deduct input tax upon purchase. The taxable amount for donations in kind is based on the (fictitious) purchase price when the donation was made.
To determine the notional purchase price, the entrepreneur must calculate an appropriate value for the purchase price either based on experience or by means of an estimate. Please note that the donating company must keep records of free gifts.
As an alternative to a donation in kind, the goods can be sold at a greatly reduced price. Even in the case of a sale significantly below cost price (with a few exceptions, for example to related parties), the basis of assessment for a sale is the actual consideration. However, in case the sales price is merely a symbolic price (ex. less than 5 % of the notional purchase price) the sales may be deemed as a donation in kind.
- Wage Tax: Home Office Generally does not Constitute a “Permanent Establishment” of the Employer
In the case of income from employment, income tax is levied in Germany by means of wage tax deduction. This is the case if the salary is paid by an employer who has a domicile, habitual residence, management registered office or permanent establishment in Germany. This means that Germany already has the right to tax the wages of an employee living abroad if the wages are paid by a permanent establishment located in Germany. This can be assumed if the wages have reduced the profit of this permanent establishment as operating expenses.
In this context, the tax authorities have clarified that an employee working from home does not generally lead to the establishment of a permanent establishment of the employer.
This also applies,
• if the employer covers the costs of the home office and its equipment;
• if a rental agreement is concluded between the employer and employee for the employee’s domestic premises, unless the employer is authorized to use the premises for other purposes (e.g. by granting the right to send other employees to the premises);
• in cases where the employer does not provide the employee with another workplace.
Please Note: A permanent establishment may exist if an employee has management functions with “external effect”.
- Salary-Benefit: How to Save a Lot of Tax with a Job Bike
Employers can grant their employees additional benefits that, unlike regular wages, are tax-privileged or even completely tax-free. One popular model is now the provision of so-called job bikes (usually e-bikes) for employees. From a tax perspective, however, it makes a difference whether the employer offers the bike as a salary extra (on top) or as part of a salary conversion (against a reduction in the regular gross salary).
The variants briefly:
- Job bike as a salary extra (on top): In this model, the company bike belongs to the employer and is provided to the employee free of charge in addition to their regular salary. If the employer buys the bike, they can depreciate it over seven years. Alternatively, they can lease the company bike. To ensure that it remains tax-free for the employee, the employer must pay 100% of the monthly leasing instalments. In this way, the employer not only saves on non-wage labor costs but can also deduct the leasing and insurance instalments as well as inspection and maintenance fees as operating expenses. In this case, the employee can use the bicycle tax-free not only for business purposes, but also for private use. This rule has been applicable since 1 January 2019 and ends on 31 December 2030.
- Job bike leasing via salary conversion: If the employer does not provide the job bike free of charge and the employee is responsible for the leasing instalments, the employee can lease the bike themselves and the legislator grants tax benefits for private use. In this variant, the employer has concluded a framework agreement with a bicycle leasing company. The monthly leasing instalment is deducted from the employee’s gross salary. No income tax or social security contributions are due on the leasing instalments and the taxable income is reduced by these instalments. The net costs for the job bike are significantly lower for the employee, usually less than half of the leasing instalment.
- Inflation Compensation Premium: Tax-Free Payment is Still Possible Until the End of 2024
Until 31 December 2024, employers can still offer their employees a tax-free inflation adjustment bonus pay out up to € 3,000. According to the Federal Statistical Office, more than three quarters of employees covered by collective agreements in Germany have now received such a special payment or will receive it until the end of 2024 in accordance with the collective agreement. However, a number of employees have probably not yet been paid or guaranteed a bonus.
The tax legislator has anchored a corresponding allowance for the period from 26 October 2022 to 31 December 2024 in the Income Tax Act.
Employers are free to decide how much of an inflation equalization bonus they grant, as long as this does not exceed a total of € 3,000 per year per employee. Payment in instalments is also permitted. Employees who have already received payments from the inflation adjustment bonus totaling less than € 3,000 can therefore still receive a tax-free (residual) payment from their employer until 31 December 2024. Although the payment is voluntary, it may still be worth asking your manager.
The special payment must be labelled as an inflation compensation bonus on the pay slip, as it may only be paid in addition to the salary owed anyway (no salary reduction for bonus permitted). Employers must mark the bonus accordingly in the payroll account. The inflation equalization bonus may be paid to all full-time and part-time employees, including marginal and short-term employees such as mini jobbers. The inflation equalization bonus does not have to be declared in the income tax return due to its tax exemption.
Disclaimer: All views expressed in this article are solely for informational purposes and should not be construed as legal advice. This information is for reference only and is bound to change in case of any amendments or changes to applicable laws. We do not assume any responsibility or liability for any errors or omissions in the content of this article, and do not make any warranties about the completeness, reliability and accuracy of the information expressed in this article.
