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Current developments in international mobility

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In this edition of our newsletter, we inform you about the latest developments in the fields of tax law, HR advisory, and national income tax. Gain valuable insights into topics such as Work from Anywhere, the 401(k) pension plan, the EES and ETIAS systems, the new 2025 coalition agreement, and the introduction of an eDeclaration in the EU. Additionally, we offer you a recap of our Global Mobility Network Days 2025. Furthermore, learn more about company bicycles in the context of early termination during the contract period, as well as the German Federal Fiscal Court ruling on the tax treatment of prize money for scientific publications.
  
Tax​​
​ 

​Deductibil​ity​​ of “Work from Anywhere” expenses for income tax purposes ​

The so-called “Work from Anywhere” model is a work concept in which the employer enables its employees to carry out their work from any location for a defined period of time without being tied to their existing fixed workplace. This offers employees a high degree of flexibility but also raises tax issues, particularly when it comes to the related tax-deductibility of expenses disclosed as income-related expenses in the personal income tax return. 

While expenses for business trips and work-related activities abroad can generally be reimbursed (tax-free) by the employer, this does not apply to the “Work from Anywhere” model due to the private nature of the trip. The expenses the employee incurs as part of “Work from Anywhere” are normally not covered by the employer.  

There are currently no specific income tax provisions regulating the expenses related to activities performed in the “Work from Anywhere” model.  Such expenses are mostly non-tax-deductible as they are private and not related to work.  

However, certain expenses can be taken into account according to the general income tax regulations if it can be proved that they have been incurred for work purposes. For example, the work-related share of Internet and telecommunications costs can often be claimed as tax-deductible expenses. If the employee incurs work-related telecommunications costs at the location where he performs his tasks under the “Work from Anywhere” model, he can recognise up to 20 percent of the invoice amount (maximum 20 euros per month) as income-related expenses in the income tax return without submitting an itemised receipt. The employee can also claim expenses for work materials, such as software or office equipment, that are used exclusively for work. Travelling, transport and accommodation costs related to “Work from Anywhere” are usually non-tax-deductible because work in this model is primarily performed on the employee's private initiative. A very important requirement for the deductibility of expenses as part of income tax assessment is to have relevant documentation allowing the employee to clearly allocate, and to substantiate, the respective expenses as either private expenses or work-related expenses.  

Although there are currently no specific regulations on how to treat expenses connected with the “Work from Anywhere” model, it can generally be said that such expenses are fully or partially tax-deductible as long as they are related to work. In this respect, it is crucial to distinguish between private and work-related expenses. Any received receipts for such expenses should be carefully stored and documented. ​


401(k) pension plan – amended legal framework as from 01/0​​1/2025 

What is a 401(k) pension plan? 
In the USA, an employee can have their employer pay a portion of their monthly income into a separate 401(k) account. It serves as retirement savings. The amount paid into the 401(k) plan is not taxable in the USA. This portion of income is therefore tax-free. The employee c​​​an use this money to purchase various financial products, such as shares or funds. During the savings period, capital gains are not taxable in the USA, either. If the capital is then paid out, the entire payout is subject to US income tax. If the employee moves to Germany during their lifetime, the question arises as to how payments from such a 401(k) pension plan are to be taxed in Germany.

Previous legal framework 
Benefits from a US 401(k) pension plan are other income as defined in Section 22 para. 5 sentence 1 of the German Income Tax Act (EStG). Previously, tax was levied on the difference between the capital payout and the contributions made. Even if the contributions paid into the pension plan were tax-exempt abroad, the benefits from the foreign workplace pension scheme were not fully taxed later on in Germany. Thus, in the case of a 401(k) pension plan, contributions were paid from tax-free income in the savings phase in the USA, while only the profit from pension funds was taxed in the payout phase in Germany. ​

Legal framework as from 01/01/2025 
In the legislator's opinion, the previous legal framework gave the 401(k) pension plans an unjustified advantage over beneficiaries of domestic workplace pension schemes. For this reason, the following sub-sentence was added to the revised version of Section 22 no. 5 sentence 2 of the German Income Tax Act (EStG): “and are not based on contributions made to a foreign pension scheme, which were subject to a comparable tax exemption or preferential tax treatment under German tax laws or tax laws of another country”. This amendment means that benefits from foreign workplace pension schemes, such as the 401(k) pension plan, will also be fully taxed later in Germany if the contributions paid abroad during the savings phase are subject to a tax exemption comparable to the one provided for by the German tax laws.  This regulation takes effect from 1 January 2025 and therefore applies to all payments made from 2025 onwards. ​
  
Law

​Update: Launch of the EES and ETIAS system​​s 

We hereby update our Good to know article of 22 January 2025 regarding the launch dates for the new EU border control systems EES and ETIAS.  

Current status of the Entry/Exit System (EES) 
On 5 March 2025, the European Council announced October 2025 as a possible start date for the gradual introduction of the EES. This timeline is not yet official, as the European Parliament must now scrutinise and approve this approach. The official EU website for the EES also states that the system is “expected to launch later in 2025” and explains that the EU authorities will provide information “several months before” the launch of the EES. 

Current status of the European Travel Information and Authorisation System (ETIAS) 
With regard to the ETIAS, the European Council has announced that the system is expected to be launched in the “last quarter of 2026”. This means that the implementation of the travel authorisation system has been postponed again. Previously, the system was planned to launch in 2025. In any case, the EU authorities have stated that the ETIAS will start “a few months” after the start of the EES. This means that any delays in the implementation of the EES are likely to affect the timeline for the ETIAS. The ETIAS is comparable to the travel authorisation system ESTA (for the USA) or ETA (for the United Kingdom). ​

New coalition agree​​ment 2025 and labour migration: What can we expect  

The current coalition agreement between the CDU, CSU and SPD sets a clear priority on labour migration. In view of demographic changes and the shortage of skilled labour in Germany, immigration of qualified workers is critically important. 

The Coalition Agreement 2025 outlines several important aspects of labour migration: 
  • Digital agency for skilled labour immigration 
The primary objective is to establish a digital agency for skilled labour immigration. This agency will provide a central IT platform to consolidate and accelerate all labour migration processes and the recognition of professional and academic qualifications. Employer participation will also be improved and recognition procedures will be standardised within eight weeks. An ad-hoc working group involving members of the federal and state governments will develop measures to speed up these procedures.  

  • Recognition and qualification counselling 
Another important issue is to continue recognition and qualification counselling for people with foreign professional qualifications at the Federal Employment Agency. The aim is to enable graduates from third countries who have completed training or a degree programme in Germany to stay and work here. 

  • ​Protecting employee rights and combating abuse 
Protecting employee rights and combating abuse is also being emphasised. The aim is to ensure a needs-based range of vocational language courses. Barriers to refugees taking up employment are to be removed and work bans are to be reduced to a maximum of three months, except for asylum seekers from safe countries of origin, Dublin cases or persons abusing asylum law. The swift and sustainable integration of refugees into the labour market will be promoted through on-the-job language learning and additional training.  

It should also be emphasised that more checks on undeclared work are being planned. The aim is to strengthen the position of the Financial Control of Undeclared Work Unit (FKS) as a customs authority and ensure fair working and competitive environment.  

Outlook 
These measures are intended to make labour migration more efficient and facilitate the integration of skilled workers from abroad into the German labour market. They show that the federal government has recognised the importance of labour migration and is actively working to make Germany more attractive to qualified immigrants. This is an important step in combating the shortage of skilled labour and securing the economic future of Germany. ​

The future of posting declara​tions: a single eDeclaration in the EU 

The European Commission has made a significant step forward in simplifying the cross-border provision of services within the EU. On 13 November 2024, a proposal was submitted to establish a single digital declaration portal for companies providing services and temporarily posting workers to another Member State. This is because the sometimes significant differences in the legal framework for the posting of workers in the individual EU Member States pose bureaucratic challenges, in particular, to small and medium-sized companies. As part of transposing the enforcement directive into their national legislations, the Member States have introduced different and strongly divergent reporting and documentation obligations. These vary considerably and comprise in total over 300 different information items across Europe. 

Goals and advantages of the new portal 
  • Better cooperation between the Member States: The new single digital declaration portal will be integrated into the existing Internal Market Information System (IMI). IMI already serves as a platform for the Member States to request information and ask for mutual assistance to monitor compliance with the rules on posting of workers.  
  • Promotion of mobility: The use of IMI and the new public interface will facilitate compliance with the worker posting regulations and increase transparency. This helps to protect the rights of posted workers and reduce the administrative burden on companies. The initiative supports the cross-border mobility of workers and contributes to the creation of a fair and transparent labour market in the EU.  
  • Reduction of administrative burden: The portal is intended to significantly reduce the bureaucratic burden on companies and facilitate compliance with the reporting obligations for the posting of workers. The implementation of the single digital declaration portal will allow service providers to use a single standardised form instead of different national forms. 

Outlook ​
The European Commission expects the portal to benefit both companies and posted workers and to strengthen the EU's competitive position. The legislative proposal for a European digital posting declaration marks significant progress in simplifying the cross-border provision of services. In order to maximise the benefits of the eDeclaration, it is essential that companies in all 27 Member States participate in this digital solution. It should be mentioned that the EU Member States have agreed on a voluntary digital registration form for the posting of workers.  

Even in the current phase, it is crucial to keep in mind the future development of the eDeclaration. Integration with the A1 certificate under social security law is just as necessary as the link to the European digital identity (eIDAS). These measures will make the eDeclaration even more efficient and user-friendly and thus will considerably facilitate the provision of services across borders. An implementation schedule is not yet known.   ​
​  
Payroll​
 

International Collaboration in Practice – Global Mobility Network Days 2025 ​

This year's Global Mobility Days were held from 3 to 5 April at Rödl & Partner's office in Krakow. Employees from 27 countries in which Rödl & Partner has offices came together to discuss current professional developments, challenges and solutions in the field of global mobility. The event provided an important platform for cross-office collaboration within our international practice group. 

The agenda included a series of workshops and professional presentations addressing central topics of our daily work: ​​​
  • International Payroll: In this thematic unit, participants discussed various challenges of international payroll accounting – in particular in view of practical issues, interfaces with other areas and technological and procedural developments, for example, in the area of business process outsourcing and digitalisation. 
  • Sales & Pricing: The aim was to create a common basis for the preparation of quotations and pricing that would enable us to structure our services for clients worldwide in a clear and standardised way. The exchange on this topic served to further professionalise our internal processes and enhance the comparability of cross-border projects. 
  • Immigration: This thematic block presented current legal developments in the area of cross-border employee assignments, complemented by insights into ongoing internal projects and the strategic advancement of our immigration services. ​
  • Compliance Abroad: The focus here was on a new conceptual approach to implementing country-specific compliance requirements. Additionally, the current status of a platform under development was presented; the platform is intended to improve collaboration and make information on this topic more accessible in the future. 

Another item on the agenda was an external specialist lecture on collaboration with a long-standing partner in the field of tax IT solutions. The lecture focused on past shared experiences and future development prospects. 

In addition to the professional topics, the event also provided an opportunity for personal exchange. The event was rounded off with a dinner together and a cultural finale with a boat trip on the Vistula. 

Conclusion
The Global Mobility Days 2025 once again highlighted how close international collaboration is within Rödl & Partner. The direct exchange between colleagues from different countries not only creates common standards but also develops a deep understanding of the country-specific consulting practices. This strengthens our ability to provide integrated and consistent services to our clients across borders. 
     
National salary tax​
 

Company bicycle in the context of early termination of employment during the lease: Are there any tax pitfalls? 

Recently, it has become very popular to offer company bicycles to employees for private use through salary conversion. Many companies have already set up relevant company bike schemes. But what happens when an employee leaves the company – whether through resignation, compulsory redundancies or under social plans?  
​​
A company bicycle is usually provided under a lease contract where the employer is the lessee. The employer is obliged to pay lease instalments to the lease company and to return the bicycle at the end of the lease term. The employee uses the bicycle during the lease term and usually covers the costs of lease through salary conversion, i.e. their gross salary is converted into a non-cash benefit in the amount of the lease instalment (less any company subsidy). Private use of the bicycle is taxed monthly at 1% of one quarter of the recommended retail price rounded down to the nearest 100 euros (including VAT, provided the bicycle is not a motor vehicle). 

At the end of the lease term, the company bike provider may offer the employee the option to buy the bike. The employer is no longer involved in this process. If the employee uses this option and buys the bicycle at a price below its current market value, the tax authorities consider this to be wages received from a third party. The company bike provider generally handles tax payment for the employee in accordance with Section 37b para. 1 of the German Income Tax Act (EStG). 

But what happens to the company bike if the employment relationship ends early? 
Possible scenarios when an employee leaves the company:​​

1. Retu​rning ​the company bicycle 

Lease contracts often stipulate that the employer may return a certain number of bicycles early free of charge. 

Some providers also have an integrated insurance policy that pays out if the employee no longer receives wages (e.g. in the event of illness, parental leave or death). It must be checked on a case-by-case basis whether the policy covers early termination due to redundancies or under social plans. If insurance coverage applies, the bike may be returned to the lease company at no further cost.  ​​

If none of the above options are available, a redemption fee (e.g. residual value of the bike) may have to be paid. These costs are borne by the employer as the lessee.  
In all three cases, there are no income tax implications for the employee. 

2. Purchase by the​ employee 

​​​The lessor often offers the employee the option to take ownership of the bike. For this purpose, the lease contract is terminated early and the employer returns the bicycle to the lease company, which sells it to the employee. But beware: The purchase must be made using net income that has already been taxed. Purchase by salary conversion is not possible as the employer is not the seller. The employee's obligation under the purchase agreement would be fulfilled solely out of their salary. 

3. Employer purchases the bicycle and transfers it to the employee 
Another option is that the employer purchases the bicycle from the lease company and then offers it to the employee free of charge or at a reduced price. In this case, the non-cash benefit may be taxed at a flat rate of 25 percent (Section 40 para 2 no. 7 of the German Income Tax Act (EStG)) – provided that the bicycle is offered to the employee as an extra benefit, on top of their regular salary. The flat-rate option is not available for salary conversion. 

Conclusion
If an employee leaves the company early, there are various options for dealing with the company bicycle. It is important that companies carefully review their lease contracts and set out clear rules on what to do with company bicycles in the event of staff reductions.  ​

German Federal Fiscal Court (BFH): Tax treatment of prize money for scientific publications 

In its judgement of 21 November 2024 (file no. VI R 12/22), the German Federal Fiscal Court (BFH) ruled that a science prize endowed with prize money is only considered a salary if it is awarded to the employee for work performed for their employer. 

In the case concerned, the employee who, in the relevant year, received a salary as a university professor and worked as a freelance lecturer and consultant, was awarded a science prize for his habilitation treatise written in the previous years.  

The BFH disagreed with the standpoint of the tax office according to which the prize money was a salary. It is true that payments and prize money received from a third party can constitute a salary if they are remuneration "for" the work which the employee performs, has performed or is to perform for his employer under the employment contract. However, since the science prize was not connected with the employment at the university, but was awarded for the habilitation treatise written already before the appointment to the professorship, it should not be assumed that such a connection existed. Neither had the employee received the prize money for the activities he had performed as part of his employment as a research fellow at various institutes. Likewise, there was no causal connection between the prize and the freelance activity as a lecturer and consultant, so the prize money could not be regarded as income from self-employment. As the employee had not written the habilitation treatise in order to possibly receive a science prize, the prize money could not be treated as income fro​​m other services within the meaning of Section 22 no. 3 sentence 1 of the German Income Tax Act (EStG). As a result, the science prize did not constitute remuneration for the employee’s work or services and was therefore not taxable. 

​Events
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​3rd July 2025​

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