Review of pension insurance notices - Here: Subsequent demands for contributions as part of the social security audit for lump-sum taxed payments

Since May 2015, the social security audit service of the German Pension Insurance (DRV) has been demanding additional social insurance contributions as part of social security audits if subsequent lump-sum tax payments pursuant to Section 40 (2) of the German Income Tax Act (EStG) were not made until after February 28 of the following year. Despite ongoing proceedings before the Federal Social Court (BSG), the DRV has not changed its administrative practice. Therefore an acute action is needed.

Background

As already reported several times, a change in the regulation of § 1 para. 1 sentence 2 Sozialversicherungsentgeltverordnung (SvEV) took place on 22.02.2015, according to which it no longer depends for the exemption from social insurance contributions on the previously applicable regulation of the mere possibility of lump-sum taxation, but on actually carried out lump-sum taxation.

Although the SvEV does not specify a time limit for the actual implementation of lump-sum taxation, the leading social insurance associations have since taken the legal view that lump-sum taxed or payroll-tax-free benefits under Section 40 (2) of the German Income Tax Act (EStG) are only exempt from social insurance contributions if the corresponding changes have been made by February 28 of the following year.

Practical implications and current legal situation

The legal opinion of the central associations of social insurance, was adopted by the social security audit service of the German Pension Insurance and has led to a large number of additional claims for social insurance contributions in the course of social security audits since 2015.

Based on our legal opinion that it was not the legislator's intention to introduce an additional time limit for lump-sum taxation, we have always recommended filing an objection against any recovery notices.

A ruling by the LSG Lower Saxony-Bremen 12th Senate dated March 24, 2022, L 12 BA 3/20, confirmed our legal opinion and ruled in favor of an employer. A case is now pending at the BSG (file number B 12 BA 3/22 R).

Recommendation for action

Despite the pending proceedings at the BSG, the DRV is currently continuing to issue supplementary claim notices as part of company audits. Based on our practical experience in supervising social security audits, we strongly recommend filing an appeal against these notices, as the DRV currently only in this case offers to suspend the proceedings until the decision of the BSG.

It is also still possible to carry out a new audit for subsequent claims that have already been completed if the statutory limitation period has not yet occurred (in 2023, these are notices from 2019).

If you need assistance with social security audits, or in protecting your interests in connection with subsequent claims by the social security audit service of the DRV, we will be happy to advise you and work with you to find a solution that is suitable for your company. We are also available to answer any other questions you may have in this context.

From Nina Loncar and Daniel Concellón