German Federal Fiscal Court: Tax exemption for Dutch wages in the residence country Germany even when applying the Dutch 30%-rule:
In its latest ruling of 10 April 2025 (VI R 29/22), the German Federal Fiscal Court has now clarified that wages taxable in the Netherlands under the double taxation agreement for employees resident in Germany remain tax-exempt in Germany even if the Dutch 30%-rule is applied, and that such are only subject to the progression clause.
The ruling therefore strengthens legal certainty for companies and employees who make use of the so-called Dutch expat-rule and makes cross-border employment activities from Germany to the Netherlands significantly more attractive for individuals with unlimited German tax liability.
Background to the ruling
Dutch law allows employers to compensate their employees for extraterritorial additional costs incurred during their stay in the Netherlands in the context of their employment with a Dutch employer. Such costs include, for example, higher prices, administrative costs for re-registration, visa procurement, finding accommodation, language courses, etc. In this regard, Dutch wage tax law grants employers the option of either tax-free reimbursement of proven actually incurred costs or, following a positive decision by the Dutch tax authorities, the possibility to treat 30% of the Dutch salary (also considering any other tax-free reimbursements paid) tax free (known as the 30%- or expat-rule).
By Christina Neugirg and Belinda Yasemin Baron
Immediate Investment Program (“Investitionssofortprogramm”) and planned Employee Package (“Arbeitnehmerpaket”) – Key Wage Tax Implications
Law on an immediate tax investment program to strengthen Germany as a business location
The German government's new immediate investment program focuses on significant tax changes to strengthen Germany as a business location. The Bundesrat approved the law at its meeting on 11 July 2025, meaning that it can now be finalised and promulgated. It will then come into force (for the most part) on the day after its promulgation. The following change is of interest with regard to income tax:
Increase in the gross list price limit for company car taxation of electric vehicles (Section 6 para. 1 No. 4 sentence 2 No. 3 and sentence 3 No. 3 German Income Tax Act (EStG), as amended)
For electric vehicles with zero CO2 emissions used as company cars, the 1% rule generally applies to a quarter of the gross list price (assessment basis) or, for the logbook method, a quarter of the acquisition costs or comparable expenses. However, this only applied previously if the gross list price did not exceed EUR 70,000. For purchases of such vehicles after 30 June 2025, the amount will now be increased to EUR 100,000. This means that the amount will be increased after all, following the deletion of the increase to EUR 95,000 from the Tax Development Act 2024 (“Steuerentwicklungsgesetz”). Note: The quartering of the assessment basis does not apply to value added tax.
By Stefan Sperandio, Johanna Wolter and Gurkaran Singh
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