The draft law in its current form
On 8 May 2019, the German Federal Ministry of Finance (BMF) published a draft Act on the Further Tax Promotion of Electric Mobility and on the Amendment of Further Tax Regulations (the Draft Act). I have already described and explained the planned amendments in detail in my blog entry on the topic of payments in kind. The Draft Act contains a new differentiation between cash receipts which are subject to payroll tax (which is the income tax withheld on the wage payment) and social security contributions and payments in kind which are exempt from payroll tax and social security contributions within the 44 euros per month limit.
In accordance with the current plans, only vouchers that entitle the holder to receive goods or services from the issuer of the voucher, are exempt from payroll tax within the 44 euro limit. All other vouchers (among others, services which are described in more detail in the Draft Act) are subject to payroll tax and social security contributions. However, we have now been informed by the Prepaid Verband Deutschland e.V. (German prepaid association, PVD) of an update regarding payments in kind, which we would of course like to share with you:
Update regarding payments in kind: the Draft Act
On 29 July 2019 the BMF submitted a draft Act on the Further Tax Promotion of Electric Mobility and on the Amendment of Further Tax Regulations to the German Federal Government for decision. In its accompanying note, the BMF expressly noted that the proposal which was previously contained in the Draft Act regarding the limitation of the payroll tax-free receipt of vouchers and other money surrogates was deleted. The BMF further added that this proposal was “deferred“.
It is most likely due to the work of special interest groups that the originally very limiting proposal was not included in the Government draft. What exactly the BMF means when saying that this proposal is “deferred“ is currently unclear. In light of this and due to the fact that such a limitation of payments in kind (which are exempt from income tax and social security contributions) was already discussed a few years ago as part of a legislative procedure, we have to continue to closely monitor, perhaps even critically, the developments in this area.
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