- How to Deduct the Home Office Per Diem Correctly
- Income Limit of the Entitlement to Parental Allowance Drops to €200,000 Per Year
- Child Benefits are Paid Retroactively Only for Six Months
- Wage Tax for Unpaid Bonuses of a Sole Shareholder and Managing Director
- How to Deduct the Home Office Per Diem Correctly
Working from home does not only save time to commute to work but also saves your tax. From 2023, employees can deduct up to €1,260 per year for working from home in their income tax returns even though they have an alternative workplace at their employer’s premises.
A daily allowance of €6 per day can be claimed for a maximum of 210 days per year regardless of whether work is done at home at the kitchen table or at a desk. However, the lump sum is only available for days on which you spend more than half of your working time in your home office and do not visit a primary place of work outside your home. Nevertheless, if these conditions are met, employees may also attend appointments away from home in between their working hours at home. For example, if an employee works at home for five hours and has a business meeting outside the company for two hours in the afternoon, they can still claim the daily allowance of €6 for this day.
In addition, 30 cents in travel expenses, per kilometre, are also applicable for the out-of-office meetings. However, if the meeting is at their company (i.e. employer’s primary place of work), the daily allowance is not applicable for this day. The commuter allowance can be claimed for the journey to the company instead, but this only amounts to 30 cents (for the first 20 kilometres) or 38 cents (from the 21st kilometre) per kilometre of the distance travelled. This means that only the one-way journey can be deducted.
Anyone who does not have an alternative workplace with their employer (e.g. teachers or field staff), can even deduct the daily allowance for working from home if they only worked at home for a short time on one day and worked predominantly at their first place of work (e.g. at the school) on the same day. In this case, the commuter allowance for the journey to work can be deducted in addition to the daily allowance.
From 2023, employees who have a separate home office at home can only claim the actual room costs incurred (e.g. pro rata rent, ancillary costs, depreciation) if the centre of all business and professional activities is at home. In such ‘centre of activity’ cases, an annual lump sum of €1,260 may alternatively be claimed for the room.
- Income Limit of the Entitlement to Parental Allowance Drops to €200,000 Per Year
Just under 1.8 million people received a parental allowance in Germany in 2023. According to the Federal Statistical Office, 1.3 million of these were women who took parental leave for an average of 14.8 months. Men only took parental leave for an average of 3.7 months.
The income threshold for entitlement to parental allowance was lowered for births from 1st April 2024. Only couples and single parents with a taxable income of no more than €200,000 per year are now entitled to parental allowance. Previously, the limit was €300,000 for couples and €250,000 for single parents.
For births from 1st April 2025, the income limit will fall further to €175,000. The higher the average net income of the parent in the year before the birth, the more parental allowance is paid. The assessment rate is generally 67% of the previous year’s income. However, a minimum monthly payment of €300 and a maximum of €1,800 is set.
Expecting parents can actively influence the amount of parental allowance in advance by changing their tax class early on. The parent, who stays at home after the birth of the child and looks after the offspring, should switch from tax class 5 to tax class 3 at least seven months before maternity leave, but preferably early in the year before the birth of the child. This increases the net salary on which the calculation of parental allowance is based, with the result that the parental allowance is correspondingly higher.
If the other parent takes over the care of the child after a certain period, the amount of their parental allowance is based on their previous net salary. If he or she was in tax class 5, there is a risk of financial disadvantages when calculating the parental allowance because their net salary was correspondingly low due to a higher tax deduction. Because of that, expecting parents should check in advance which tax class combination is ultimately the most favourable for them.
- Child Benefits are Paid Retroactively Only for Six Months
Since 18 July 2019, child benefits have only been paid retroactively for six months prior to the application and the Federal Fiscal Court considers this to be legal. However, the entitlement to child benefits still applies and can lead to a tax deduction of the child allowance for high income taxpayers.
Child benefits are only paid retroactively for the last six months prior to the beginning of the month in which the application was received by the family benefits office (§ 70 para. 1 sentence 2 and § 52 para. 50 sentence 1 of the Income Tax Act (EStG)). The Federal Fiscal Court has ruled that this payment restriction also applies to applications submitted only after 18 July 2019 if they relate to periods prior to 18 July 2019.
On 5 August 2019, the claimant applied for child benefits for the period from August 2018 to October 2019. In a decision dated 7 May 2020, the Family Benefits Office determined the child benefits can be applied for, but it limited the payment to the period from February to October 2019. In their objection, the claimant did not need the six-month period for the duration of child benefits before 18 July 2019 to apply, even if the application was submitted after this deadline. The Family Benefits Office and tax court rejected this and ruled that the time limit for applications after 18 July 2019 was legal, even if the period applied for was earlier. Ultimately, the Federal Fiscal Court also confirmed this.
If your earnings are in a range that the child tax allowance has a more favourable effect on your income tax assessment, the entitlement (even without payment) to child benefits may be sufficient for the tax deduction (Section 31 sentence 5 EStG). However, child benefits must also be applied for.
- Wage Tax for Unpaid Bonuses of a Sole Shareholder and Managing Director
Contractually agreed bonuses can also be deemed to have been received without payment. A judgement by the Federal Finance Court shows that a waiver after the bonus has been paid is “too late”, i.e. can lead to taxation of the unpaid bonuses.
Background
Bonuses are part of wages as other remuneration as soon as they are received (Section 38a (1) sentence 3 of the Income Tax Act). However, in the case of a salary waiver, taxation can also occur without an inflow. The Federal Fiscal Court has once again dealt with such a case.
Facts of the Case
In addition to their monthly salary, the sole shareholder and managing director of a GmbH was entitled to a bonus of 20% of the annual profit under their management contract, which was due one month after the annual financial statements were prepared. The bonuses were not paid out in the years 2015 to 2017. No liability items were recognised for this in the GmbH financial statements. In the income tax returns, the sole shareholder and the managing director declared the salary without bonuses and was also assessed as such. Following an income tax audit at the GmbH, the assessments were amended, and the bonuses were taxed. Ultimately, the bonuses would be deemed to have been received at the time the balance sheet was prepared, as the sole shareholder and the managing director was able to determine the payment themselves.
The action was upheld by the tax court and argued against the taxation of the bonuses that had not accrued because they had not led to a reduction in income for the GmbH due to the absence of a liability. The tax office lodged an appeal against this, which the Federal Fiscal Court countered by cancelling the tax court ruling and referring the case back to the tax court. The court must now investigate whether the waiver of bonuses resulted in a hidden contribution to the GmbH. The Federal Fiscal Court disagreed with the opinion of the tax authorities that it was not important whether a corresponding liability was recognised in the GmbH’s financial statements.
Please Note: The date on which the salary waiver is declared is decisive for the inflow of salary. A hidden contribution, which would lead to an inflow of wages, only occurs if the sole shareholder and the managing director waives their salary or bonus entitlement after it has arisen. If they waive this beforehand, they would be working for free, which would not result in an inflow of wages through a hidden contribution.
Practical Tip: The sole shareholders and the managing directors are on the safe side if they act in good time. If salary components are not to be paid out, a clear declaration of intent before the balance sheet date is recommended. Once the claim is undisputed and due, it is assumed that it has been received.
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.
