Lohnsteuer
What does the Future Financing Act have in store for wage tax in the context of employee share ownership under §§ 3 No. 39, 19a GITA?
The Bundestag passed the Future Financing Act on 17 November 2023. Compared to the government draft, it has also been amended and supplemented at some points in the area of wage tax. The Bundesrat has approved the Act on 24 November 2023 and can now be submitted to the Federal President for signature and then proclaimed.
The Future Financing Act is intended to make it easier for companies to access the capital market and raise equity capital. This is to be achieved by making the acquisition of shares and listed securities more attractive as a capital investment. As part of this, the tax framework is also to be improved, primarily through changes to employee share ownership within the scope of §§ 3 No. 39 and 19a of the German Income Tax Act (GITA), which are briefly discussed below:
From Stefan Sperandio und Simeon Wahl
UPDATE on the recognition of "no-show" costs as wages on the occasion of company events
The company Christmas parties are just around the corner – planning is already underway. To avoid an unpleasant cost awakening after the party, tax aspects must also be taken into account when calculating the costs. Participation in these parties generally constitutes wages for employees. Whether the corresponding total costs for determining wages are distributed among the registered or participating employees has been discussed and now decided by the highest court with regard to company events.
Judgement of the Federal Fiscal Court in 2021
In connection with company events, the Federal Fiscal Court (BFH) ruled on 29 April 2021 (case no. VI R 31/18) that, within the framework of § 19 para. 1 sentence 1 no. 1a sentence 2 GITA, the allocation of expenses directly related to the company event must be based on the actual participants present (not the registered participants) at the company event. This applies irrespective of whether the corresponding expenses lead to an individual pecuniary advantage for the individual employee.
Due to the allocation standard used by the BFH, according to which the expenses to be taken into account by the employer (total costs) are to be divided equally between the persons actually present at the company event (and not those registered), even in the case of "no-show" costs, constitutional issues arose which were referred to the Federal Constitutional Court (BVerfG). The BVerfG therefore now had to clarify whether so-called "no-show" costs lead to an unjustified sham taxation of wages for the participants actually present and, in the absence of actual enrichment, whether there is a violation of the objective principle of ability to pay (Art. 3 para. 1 GG).
Decision of the BVerfG in 2023
On 20 July 2023, the BVerfG then issued a corresponding chamber decision on this (case no. 2 BvR 1443/21). With this decision, the constitutional complaint in the case was not accepted for decision, in which the BFH had ruled that when assessing wages on the occasion of a company event, all expenses incurred by the employer that are directly related to this event must be recognised, regardless of whether they can constitute a benefit for the employee; the employer's total costs must be divided equally among the participants actually present at the company event.
From Prof. Dr. Nikolaus Kastenbauer
Taxation of stock options in case of change of residence
Do you have employees with international working activities that you compensate with stock options or other long-term incentives? In terms of taxing this remuneration, you should be aware of the decision of the Federal Fiscal Court (Bundesfinanzhof, BFH) of 21 December 2022, I R 11/20:
When an employee is granted stock options as part of their employment relationship, the resulting benefits are only realized at the time of actual exercise of the option. The benefits from the exercise of the stock options are granted on a time-period basis and are therefore to be allocated proportionally to the vesting period. According to the principle of causation, this generally refers to the period between granting the stock options and their initial exercisability.
From Hannes Zug and Marina Schmidt
“Silent shareholder” in the employer's company – income from employment or capital income?
It was disputed before the Tax Court of Baden-Württemberg whether profit shares from a silent partnership of an employee constitute taxable wages or capital income. According to the judgment, this was to be decided in principle by way of an overall view, considering all the significant facts of the individual case.
In practice, management participation is a popular and often used remuneration model to give employees the opportunity to participate in the success of the company and to retain them in the long term. The term "management participation" is to be understood broadly and covers all participations of the management in the gain of the period and/or the company value, regardless of whether it is an indirect or direct participation in the company under company law or by a contractual agreement. However, in practice there are always disputes regarding the classification of income due to the competitive relation between income from employment and capital income.
From Jasmin Bergsiek and Tim Schlifelner
What does the Growth Opportunities Act mean for wage tax?
The Bundestag passed the Growth Opportunities Act on 17 November 2023. Compared to the government draft, it has also been amended and supplemented in a number of areas in the area of wage tax. The Bundesrat did not approve the law on 24 November 2023 and called on the Mediation Committee. It is therefore not certain that the law will come into force on 1 January 2024.
The Growth Opportunities Act is intended to create a tax framework to strengthen German competitiveness by promoting growth opportunities for the economy, investment, and innovation in new technologies without creating an additional price pressure.
Important changes have been listed below from a payroll tax perspective.
From Stefan Sperandio and Belinda Yasemin Baron
© 2017 - 2023 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
