Application of the discount allowance for employees of a group-affiliated service company
The discount allowance pursuant to Section 8 (3) sentence 2 of the German Income Tax Act (EStG) can also be claimed if the employer facilitates and carries out the sale of the discounted goods to end consumers on behalf of and for the account of another (group) company. An appeal against the ruling of the Lower Saxony Fiscal Court of 10 December 2025, ref. 3 K 78/25, is pending before the Federal Fiscal Court (ref. VI R 1/26).
What is the issue?
The dispute concerned whether the employer, a group-affiliated service company, is entitled to grant the discount allowance under Section 8 (3) sentence 2 EStG to its own employees if the employer (merely) facilitates and carries out the sale of the discounted goods to end consumers on behalf of and for the account of another (group) company.
What are the facts underlying the ruling?
A group-affiliated service company (hereinafter: employer) exclusively employs employees in a brick-and-mortar store. The employer belongs to the X-GmbH group. It is responsible for the distribution of goods to the end customers of X-GmbH. In this capacity, it bears full responsibility for the operational running of the store and its strategic management. The goods offered belong to X-GmbH. All sales made by the employer are carried out in the name and on behalf of X-GmbH. Employees receive discounts when purchasing goods from the product range in the employer's store. These benefits remain untaxed for wage tax purposes, as they fall below the discount allowance pursuant to Section 8 (3) sentence 2 EStG.
By Stefan Sperandio und Khuong Lena Nguyen Ngoc
Change in BMF letter on the tax treatment of wages under double taxation agreements
In a letter dated 19 December 2025, the Federal Ministry of Finance (BMF) updated its BMF letter dated 12 December 2023, on the taxation of wages under double taxation treaty (DTT). The changes will mainly apply from 1 January 2025 and contain several technical clarifications and additions.
An initial presentation of the draft was already provided in Workforce Newsletter - Issue 6, November 2025. This newsletter focuses on the key practical points of the final letter. We have not gone into detail on specific adjustments, such as those relating to individual DTT constellations.
Changes to the assessment of an economic employer and “employer certificate”
A key point in the final BMF letter dated 19 December 2025, is the new regulation on economic employers and the now mandatory employer certificate for cost bearing. This certificate must show the extent to which wage, ancillary wage, and administrative costs were passed on to the host company. The taxable wage must be stated separately.
By Stefan Sperandio, Maria Wagner und Ifza Syed
Expenses for a farewell party do not constitute wages if the party is hosted by the employer
In its ruling of 19 November 2025 (VI R 18/24), the Federal Fiscal Court (BFH) decided that the employer’s expenses for a reception held on the occasion of an employee’s retirement do not constitute wages for the retiring employee if the event is a celebration organized by the employer. This explicitly applies as well to the portions of the costs attributable to the employee themselves and to family members invited by the employer. In doing so, the BFH explicitly contradicts the administrative interpretation in R 19.3(2)(3) of the Wage Tax Guidelines (LStR) and provides employers with greater flexibility when organizing retirement parties.
Facts
In the underlying case, a financial institution (the plaintiff) held a reception in 2019 at its corporate headquarters to mark the retirement of its former CEO. The new CEO was also introduced during the reception. An organizing committee appointed by the Board of Directors and led by an employee from the Human Resources department was responsible for organizing and executing the event; this committee prepared the invitation cards and issued the invitations based on a guest list previously determined according to business-related criteria.
By Stefan Sperandio und Gurkaran Singh
Cross-border commuters under the Switzerland-Germany Double Taxation Agreement and the Protocol of Amendment of 21 August 2023
The revised version of the Protocol to the Germany–Switzerland Double Taxation Agreement (DTA) marks a significant step forward in the taxation of cross-border commuters. But what do these changes mean in concrete terms for employees and employers? What new opportunities arise, and where do new challenges emerge?
Our article provides a concise and practical overview of key changes, highlights opportunities and pitfalls, and offers ideas for concrete courses of action.
Economic Interdependence and the Importance of Cross-Border Worker Regulations
Relations between Germany and Switzerland are characterized by intensive cross-border economic ties. With the Protocol of Amendment to the DTA between Germany and Switzerland dated 21 August 2023, which is to take effect on 1 January 2026, previous questions of interpretation regarding the cross-border commuter provision of Art. 15a of the Germany-Switzerland DTA have also been clarified by law. This provision is relevant for numerous employees who live on one side of the border and work on the other. It must be considered before the so-called “183-day rule” under Article 15 of the Germany-Switzerland DTA.
By Stefan Sperandio, Johannes Balzer and Eleni Sengkergki
Electronic Data Exchange for Payroll Tax Withholding and KIRA Audits in Social Security Starting in 2026
Since 1 January 2026, private health insurance (PKV) and long-term care insurance (PV) base contributions have been provided electronically via ELStAM, the Digital Payroll Interface (DLS 2026.1) has been introduced, and the Federal Social Insurance Agency (DRV Bund) is using KIRA for more targeted audits.
Electronic data exchange for private health and long-term care insurance basic contributions since 1 January 2026
The Annual Tax Act of 2024 introduced electronic data exchange for private health insurance and private long-term care insurance base premiums in payroll tax withholding.
Private health insurance companies now report the tax-deductible basic health and long-term care insurance contributions to the Federal Central Tax Office (BZSt), which makes the data available via ELStAM. Employers retrieve this data using the existing ELStAM procedure.
The previous standard allowance and the paper certificate for private health and long-term care insurance premiums are being eliminated without replacement.
If no electronic data is available at the time of payroll processing, no amount may be entered. The previous standard allowance is no longer available. A zero entry applies.
If the private health insurer makes a retroactive correction, the employer is obligated to make an immediate retroactive adjustment. Liability under Section 42d of the Income Tax Act (EStG) remains in effect.
By Stefan Sperandio, Sarah Dabringhausen and Lenni Mikuszewski
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