March 2026 edition: Equity Services, new practice for assignments abroad, EU infringement proceedings against Germany, cross-border remote work, and recent case law on maintaining two households and employer benefits

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• Tax »
• Law »
• National salary tax​ »
• In the Spotlight: Visa-free Entry to China – Important Exceptions »

Tax

Our advisory area: Equity Services

We are pleased to introduce our “Equity Services” area in more detail. Equity Services covers global advisory services for employee equity participation programmes. From classic stock options to innovative compensation models, we develop tax-optimised solutions. Attractive, compliant, sustainable.

Our advisory focus areas are:

Advising and supporting the design and implementation of (new) equity plans

As experienced advisors, we support you in designing and implementing new participation models (including stock options, SARs, phantom stocks), for example with our technical expertise in drafting and/or adapting plan rules and allocation documents. This also includes, for example, developing specific compensation models for board members and executives. Where required, we are also happy to support you in obtaining binding rulings from tax and social security authorities.

Preparing, reviewing and updating tax guides for existing equity plans

As experienced advisors, we support you in meeting compliance requirements for your equity plans—nationally and internationally. As part of a so-called Global Tax Review, we prepare, review and update tax documentation such as tax guides for employees, HR and payroll, as well as country reports and payroll summaries.

Holistic advice on equity plans

We provide holistic advice. This includes global coordination, among other things with payroll, to ensure correct reporting in payroll accounting. Where authorised to prepare income tax returns in the respective countries, we implement the tax content relating to the equity plans and, for example, carry out so-called TEQ calculations.

We would be happy to advise you on employee equity participation programmes. Please do not hesitate to contact the responsible colleagues Valentin Peters (valentin.peter@roedl.com) and Corinna Landua (corinna.landua@roedl.com).

Law

Additional information on the electronic application and certification procedure and new developments in legal practice for assignments abroad in treaty countries

In our December issue, we already reported that, as of 01/01/2026, applications for secondment certificates and exemption agreements for employee assignments in treaty countries have been switched to an electronic application and certification procedure pursuant to Section 106c SGB IV, and that the digital procedure already established for A1 certificates (within the EU/EEA/Switzerland) has been extended to treaty countries. This means the previous paper-based application process has also become obsolete for employee assignments in treaty countries—except for the following exception: If the application falls within the remit of DRV Bund, electronic submission is still only possible in paper form. The reason is that DRV Bund has not yet switched to the electronic procedure.

For secondments to a treaty country, the competent collection agency, DRV Bund or the DVKA is responsible. In any case, responsibility must be checked before submitting an application (as special rules apply here, among other things). For applications for an exemption agreement, the DVKA is exclusively responsible for employee assignments in treaty countries.

The positive effects of switching to the electronic application and certification procedure for employee assignments in treaty countries include:

• The required secondment certificates are generally issued faster (typically within 3 working days)
• The procedure is more standardised and transparent
• Paper-based processes are reduced
• A major digitisation step in international social security law
• Harmonisation of legal practice

In addition, new developments in legal practice relating to assignments in treaty countries can be observed in the following areas:

Recharging costs to an affiliated company: Assessing whether a secondment within the meaning of a treaty exists (especially in the case of recharging salary costs) is not always straightforward, as the concept of secondment is not clearly defined in many treaties. Until now, the DVKA has at least taken the view that any recharging of salary costs (even for employee assignments of only a few weeks) does not necessarily preclude a secondment in the social security law sense, and in this respect has followed the principles of the guidance on the insurance-law assessment of posted workers, under which a recharging of costs for assignments of up to a maximum of two months is not detrimental to assessing whether the conditions for a secondment are met.

This now also applies to employee assignments in the treaty countries previously treated very strictly—Australia, China and Quebec—for short-term assignments of up to 2 months. Previously, the DVKA assumed that any assignment in these countries (even for only a few weeks) where salary costs were recharged would rule out a social security law secondment. India remains an exception: Any form of cost recharging (regardless of the length of the assignment in India) excludes a secondment within the meaning of the German-Indian treaty.

New clarification on calculating the secondment period: The DVKA clarified again that the respective treaties use different time-limit terms (“months” and “calendar months”), which has a direct impact on the maximum secondment period. Time limits calculated in “months” are included, among others, in the treaties with the following countries: Albania, the Philippines, Uruguay. The time limit then starts with the actual start date of the secondment (e.g. 08/04).

Time limits calculated in “calendar months” are included, among others, in the treaties with the following countries: Australia, Brazil, China, Japan, Korea, Quebec, Tunisia. The time limit then always starts on the 1st day of the month in which the activity begins. The actual start date/day of the assignment is disregarded. This means that the secondment period is effectively shortened (e.g. assignment start on 18/06/2026, permissible secondment period e.g. 36 months: the period already starts running on 01/06/2026. The permissible secondment period therefore ends on 31/05/2029 and not only on 17/06/2029).

Practical tip

Before any employee assignment to a treaty country, the employer should familiarise itself with the rules of the treaty of the respective host country or seek advice on this. Due to differing requirements and regulations, assignments abroad—especially in treaty countries—can repeatedly lead to surprises when applying for secondment certificates or exemption agreements.

EU initiates infringement proceedings against Germany (INFR(2025)4025)

The European Commission has initiated infringement proceedings against Germany (INFR(2025)4025). The reason is the Commission’s objection that Germany is violating key EU provisions on the freedom to provide services and the right to freedom of movement for legally resident third-country nationals, in particular with regard to the posting of third-country nationals employed by EU companies.

Background: Posting third-country nationals within the EU

The Vander Elst judgment (CJEU, Case C‑43/93) clarified in 1994: EU companies may temporarily post third-country nationals who are lawfully employed by them to provide services in other Member States without requiring additional work permits. This is intended to facilitate cross-border services and strengthen the internal market (Art. 56 TFEU; Art. 21 Schengen Implementing Convention), in which service providers can operate throughout the EU without disproportionate burdens and obstacles while workers’ rights are protected. The Commission considers these principles to be impaired by the German visa requirement. German national measures provide that third-country nationals who have already undergone an entry check and hold a residence permit or a long-stay visa from another Member State must, before being posted to Germany for up to 90 days within a 180-day period, generally apply for and obtain an additional “Vander Elst” visa at a diplomatic mission. In the Commission’s view, this creates additional hurdles and contradicts the Schengen principle of visa-free short stays.

Criticism of the German legal situation

The Commission takes the view that this additional visa requirement restricts key EU rules that provide for visa-free entry for up to 90 days within a 180-day period. The decision of the Higher Administrative Court of Hesse (order of 26 March 2025 – 3 B 1615/23) also confirms the procedural hurdles at the heart of the EU-law criticism. In the court’s view, the duration of the Vander Elst visa procedure exceeds the five-day limit considered proportionate by the Court of Justice of the European Union (CJEU). This is mainly because an additional appointment at the foreign mission must be arranged and the visa application is subject to a comprehensive review by the German embassy. According to the decision, such procedural steps constitute disproportionate bureaucratic hurdles, as a Member State may not make the provision of cross-border services more difficult through administrative requirements. The Administrative Court of Osnabrück (20/01/2026 – 7 B 39/25, BeckRS 2026, 366) also considers excessively long processing times to be contrary to EU law and aligns with the CJEU’s view.

What happens next?

With the letter of formal notice, the Commission has initiated the first stage of the infringement procedure. Germany has two months to respond. If the response remains insufficient, a reasoned opinion may follow; subsequently, an action before the CJEU would be possible. If the CJEU finds an infringement, Germany must adapt its legislation and administrative practice; otherwise, financial sanctions may be imposed (Art. 258, 260 TFEU).

For practice

• Short-term postings to Germany remain planning- and time-critical. Plan lead times more realistically and factor in dependencies on embassy appointments.
• Carefully document cases with long processing times; current case law shows that disproportionate duration can be legally relevant.

Cross-border teleworking: new criteria for assessing a permanent establishment risk

The characterization of a fixed place of business in a home office situation now requires proof of permanence of activity and genuine commercial reasons: feedback on the 2025 update to the OECD model convention.

On November 18, 2025, the OECD adopted a new version of its commentary on Article 5 of its model tax convention, marking a key milestone for the characterization of permanent establishments in teleworking situations. These commentaries are particularly important for assessing the risk of permanent establishment in France, since to our knowledge there are no tax instructions in French law specifying the criteria for qualifying a permanent establishment in the case of home office.

Previously (2017 OECD Model), a home office created a tax risk if it was used continuously and was at the disposal of the company. The difficulty was determining in which cases the office could be considered at the disposal of the company. This framework proved unsuitable in a situation where remote working is becoming increasingly common.

The OECD now provides the following two criteria for qualifying a fixed place of business:

1. The home office (or any other relevant location) must be used on a continuous basis: the remote worker must spend at least 50% of their working time there over a 12-month period.
2. This physical presence must be motivated by a commercial reason (interactions with local customers, prospecting for local customers, access to on-site resources, etc.). A simple personal preference on the part of the employee is not sufficient.

However, if the 50% threshold is reached but there are no commercial reasons, other facts and circumstances may still qualify as a fixed place of business, particularly when an individual is the only person, or the main person, carrying out the business activity. A case-by-case analysis is therefore always essential.

Simplified examples cited by the OECD:

While these criteria are useful for assessing the risk of a permanent establishment, it should be noted that the OECD’s comments are not binding on the tax authorities or French courts, whose position is still awaited. These changes also only concern the fixed place of business criteria. Other possible criteria for qualifying a permanent establishment (in particular the dependent agent) are not affected.

In conclusion, while this OECD update clarifies the criteria for assessing the risk of permanent establishment in the case of home office, it is still not binding on the French tax authorities or the tax courts. Therefore, despite the update to the OECD comments, companies must continue to verify in advance the potential impact of their employees’ remote working projects outside the jurisdiction of their headquarters.

At the same time, issues related to the impact on labour law and social security law (in particular the law applicable in each case) should also be analysed.

Update on the Dutch 30% Ruling and Related Changes

What is the 30% scheme?

The Dutch 30% ruling (also referred to as the expatriate scheme) is a tax facility for incoming employees recruited from abroad to work in the Netherlands. Under this scheme, employers may grant a taxfree allowance of up to 30% of the employee’s taxable salary to compensate for the additional costs associated with working and living outside the employee’s country of origin (socalled extraterritorial costs).

In recent years, the Dutch government has significantly revised the scope and application of the 30% ruling and related tax benefits. Below we outline the most important changes and their impact.

These changes affect:

• Incoming employees working in the Netherlands who apply the 30% ruling or reimbursements of actual extraterritorial costs (ETK);
• Employers who employ or plan to employ international staff in the Netherlands;
• Employees who previously qualified as partial nonresident taxpayers under the 30% ruling.

What is changing?

Three key developments are relevant:

1. The 30% ruling itself

• The 30% ruling remains available, subject to statutory conditions and salary thresholds.
• As of 2027, the maximum taxfree allowance will be reduced to 27% for new cases, while transitional rules apply for existing cases.

2. Restriction of extraterritorial cost (ETK) reimbursements

• If the 30% ruling is not applied or has ended, only actual ETK may be reimbursed taxfree.
• From 1 January 2026, certain cost categories (such as additional costs of living, including utilities, and private phone calls to the home country) will no longer qualify as taxfree ETK reimbursements.

3. Abolition of the partial nonresident tax status

• As of 1 January 2025, the option to be treated as a partial nonresident taxpayer has been abolished.
• This means that affected employees will generally be subject to Dutch taxation on worldwide income, including Box 2 (substantial interest) and Box 3 (savings and investments), subject to transitional rules.

Why are these changes being introduced?

The Dutch government is pursuing the following targets:

• Reduce the fiscal cost of the 30% ruling and related facilities;
• Create a more level playing field between domestic and international employees;
• Limit perceived tax advantages that go beyond compensation for actual extraterritorial costs.

How do these changes work in practice?

• Employers must choose between applying the 30% ruling or reimbursing actual ETK.
• Once the 30% ruling ends, actual ETK can generally no longer be reimbursed taxfree.
• From 2026 onwards, fewer cost types qualify as ETK.
• From 2025 onwards, employees can no longer opt for partial nonresident taxpayer status, except where transitional arrangements apply.

Where do these rules apply?

The changes apply to employment situtions in the Netherlands and are embedded in Dutch wage tax and income tax legislation.

When do the changes take effect?

• 1. January 2025: Abolition of partial non-resident taxpayer status.
• 1. January 2026: Restriction of tax-free reimbursement of certain extraterritorial costs.
• 1. January 2027: Reduction of the maximum 30% allowance to 27% for new cases, subject to transitional rules.

What is the purpose and impact?

For employees, this may result in lower net income and broader Dutch tax exposure.

For employers, this increases the importance of:

• Carefully structuring international employment packages;
• Timely reviewing existing 30% rulings and ETK reimbursements;
• Managing expectations of international hires regarding net compensation and tax position.

Reform of the State Labour Inspectorate in Poland: B2B model and employment relationship

For several months, one of the most important topics in Poland has been the reform of the State Labour Inspectorate (Polish: Państwowa Inspekcja Pracy, “PIP”), which is intended to give inspectors the ability to reclassify civil law contracts and B2B contracts into an employment relationship. The proposal has generated strong reactions among entrepreneurs and employers. The latest version, developed through dialogue, is currently being processed in the Sejm (Polish lower house of Parliament). The reform also carries political significance as a condition for the disbursement of funds under the Poland’s Recovery and Resilience Plan.

What do the changes concern?

The proposal has been, and continues to be, widely debated across various groups, and the result of these intense discussions has been several iterations of the draft. Officially, the reform is intended to strengthen employee protection, but in practice it will primarily affect hundreds of thousands of individuals working in a B2B model, many of whom are not interested in becoming employees.

Until recently, the B2B model stood for:

• a B2B contract symbolised professional independence,
• it provided higher earnings,
• it offered flexibility not available under an employment contract.

Today, B2B cooperation is becoming a source of considerable uncertainty for many self-employed people in Poland. The amended version of the draft act, published on 28 January 2026, provides for fundamental changes, namely the right of inspectors to administratively reclassify civil law contracts, including B2B relationships, into employment contracts. Although the reform is intended to protect employee rights, in practice it triggers numerous financial, tax, social security contribution and, in many cases, international consequences.

At the end of the second quarter of 2025, nearly one and a half million people in Poland worked solely under mandate contracts and related civil law agreements. In addition, according to estimates by the Ministry of Family, Labour and Social Policy, sham B2B contracts result in approximately two billion zlotys in annual losses to the state budget.

What did earlier drafts provide for?

All previous drafts included:

• granting PIP extensive powers to reclassify civil law contracts into employment contracts by administrative decision,
• strengthening cooperation and information exchange between PIP, the Social Insurance Institution (ZUS) and the National Revenue Administration (KAS),
• the possibility of conducting remote inspections,
• doubling the maximum fines imposed in summary proceedings.

In one of the most controversial versions, published in early September 2025, the main concerns related to the immediate enforceability of such decisions and the fact that recognising the existence of an employment relationship could also apply retrospectively. In practice, this would have required corrections to PIT tax settlements and ZUS contributions for up to five years following a PIP inspection.

What mechanisms currently apply under Polish law?

Polish law already provides a mechanism for judicial determination of an employment relationship. If, in practice, cooperation – such as under a B2B contract – meets the criteria of an employment relationship (i.e., subordination, strict control and no entrepreneurial risk on the contractor’s side), the individual performing the work may bring an action for a declaration of the existence of an employment relationship under Article 189 of the Polish Code of Civil Procedure. The court may confirm that an employment relationship exists, granting access to Labour Code rights, such as paid leave or overtime pay.

What does the current draft bill in the Sejm provide for?

Once the new regulations enter into force, a PIP Inspector will be able to independently reclassify a civil law contract into an employment contract by means of an administrative decision. An appeal procedure will be available for such decisions.

The latest version of the proposal contains less restrictive solutions than the version published at the end of 2025, in particular:

1. A reclassification decision may be issued only if the engaging entity fails to comply with an inspector’s order to conclude an employment contract. This acts as a warning mechanism preceding the formal decision.
2. The decision will apply only prospectively (ex nunc), not retrospectively. However, this does not prevent tax and social security authorities from pursuing arrears for earlier periods.
3. The bill introduces the possibility of applying to the Chief Labour Inspector for an individual interpretation on whether a given relationship meets the criteria of an employment relationship.

The bill also provides for a sixmonth amnesty. Entities that voluntarily regularise cooperation and conclude employment contracts will avoid criminal liability. Although the legislator has introduced mitigating measures, the degree of state intervention in business relationships remains significant.

Why are B2B contracts so widespread in Poland?

B2B contracts have long attracted specialists, particularly in highincome sectors. Their popularity stems from the fact that they allow higher net earnings at the same cost to the engaging entity.

The reasons include:

• lower social security and health insurance contributions,
• the possibility of choosing more favourable tax regimes, such as the flat tax or the lumpsum tax on registered income – which becomes particularly beneficial after exceeding the threshold of one hundred and twenty thousand zlotys of annual income and helps avoid the socalled solidarity levy.

By comparison, income from employment is taxed at the following rates:

• 12 percent up to 120,000 zloty,
• 32 percent above this threshold,
• 4 percent additional solidarity surcharge from 1 million zloty.

Key protection mechanisms for companies

The bill includes certain protective elements, such as individual interpretations and an amnesty, which may be particularly relevant for businesses considering their cooperation models.

Conclusion

In Poland’s public debate, the proportionality of the new regulation is widely discussed. One must expect the new provisions to enter into force, as they constitute a “milestone” Poland committed to under the Poland’s Recovery and Resilience Plan. Failure to meet this obligation may result in the withholding of subsequent funding tranches, meaning there is strong determination to implement the new regulations.

Entrepreneurs considering hiring Polish employees should take the new rules into account. Companies currently operating under the B2B model or other civil law contracts should review their cooperation frameworks and assess the risks related to potential reclassification.

The significant changes currently being processed aim to protect employees and eliminate labour market abuses. Nevertheless, they will undoubtedly influence caution in selecting the form of cooperation. It is also possible that the reform may force a change in cooperation models even for businesses acting in compliance with the law and operating under the B2B model based on mutual consent.

National salary tax

Accommodation costs for a domestic secondment without a local employment contract

An employer may reimburse an employee’s necessary additional expenses for work-related overnight stays at a place of work that is not the first place of work tax-free without any cap (see Section 3 no. 16 EStG in conjunction with Section 9(1) sentence 3 no. 5a EStG). Only after 48 months does a cap of €1,000 per month apply (or from 2026 €2,000 for overnight stays abroad).

If an employee is seconded from abroad to Germany (hereinafter: delegate), it must therefore be examined whether, during the period of the secondment, they are on business travel, or whether they establish a first place of work in Germany, meaning that the rules on work-related maintaining two households must be observed.

The first place of work is the employer’s fixed business establishment, that of an affiliated company (Section 15 of the German Stock Corporation Act) or a third party designated by the employer to which the employee is permanently assigned. The assignment to a fixed business establishment is determined by the service- or employment-law provisions as well as the agreements and instructions that give them substance (Section 9(4) sentences 1 and 2 EStG).

If the employee is assigned under employment law to a specific place of work, then due to the employer’s right to issue instructions, the first place of work does not depend on the qualitative focus of the activity that the employee performs or is to perform there. It is necessary, but also sufficient, that the employee has to perform at least to a small extent at the first place of work activities that they owe under the employment contract and that belong to the occupational profile they perform.

The tax authorities distinguish as follows in margin nos. 23 and 24 of the BMF letter dated 25/11/2020 (BStBl. I 2020, 1228):

• If the delegate is permanently assigned, under a separate employment contract with the host company, to a fixed business establishment of that company, a first place of work exists at the host company.
• If the delegate works at a fixed business establishment of the host company without concluding a separate employment contract with the host company, a first place of work exists there only if they have been permanently assigned by the sending company to a fixed establishment of the host company.

In both cases, the assignment is permanent if it is open-ended, covers the duration of the entire—fixed-term or open-ended—employment relationship, or extends beyond a period of 48 months.

In its judgment of 14/05/2025 (ref. 9 K 94/23), the Lower Saxony Fiscal Court (FG Niedersachsen) held that a delegate who is seconded for a fixed period of no more than 48 months to a domestic permanent establishment of their foreign employer, without concluding a local employment contract for this purpose, does not have a first place of work at that business establishment for the duration of the secondment. This also applies if they do not have to perform any activities at the previous location of the first place of work during the secondment.

In the case at hand, the delegate had worked for an employer in Brazil since 1993 and was seconded from 01/02/2020 to 28/02/2022 to a German permanent establishment of the employer. No German employment contract was concluded. Before and after the secondment, he was employed and worked in Brazil. His residence in Brazil was maintained during the secondment. The family accompanied the delegate to Germany. The delegate rented a furnished apartment for €1,650 per month including ancillary costs, plus electricity, heating and water. The employer covered the accommodation costs incurred in 2020 amounting to €31,397.89 and grossed these up to €56,689 under the German wage tax withholding procedure due to the existing net salary agreement.

In his income tax return, the delegate applied to treat the work-related portion of €30,234 of the reimbursed accommodation costs, which had been reimbursed as taxable, as tax-free. He calculated this in line with the judgment of the Lower Saxony Fiscal Court dated 30/10/2015 (EFG 2016, 557) as follows:

The court found that, during the period of the secondment, the delegate remained permanently assigned to the head office of his employer in Brazil. Since the secondment agreement with the assignment to the employer’s establishment in Germany had been concluded as fixed-term from the outset, there was no permanent assignment in this respect.

A further employment relationship with the domestic establishment cannot be inferred from the fact that the employer’s domestic establishment in Germany was obliged to withhold wage tax under Section 38(1) sentence 1 no. 1 EStG. This is because the public-law obligation to withhold wage tax has no effect on the employment-contract legal situation.

The court notes that this would also apply in cases where the delegate comes from a country with which Germany has concluded a double taxation agreement. Nor would any status of the host company as the economic employer within the meaning of Art. 15(2)(b) OECD-MC lead to the assumption of a further employment relationship. This is because the term “Dienstverhältnis” used in Section 9(4) sentence 3 alternative 2 EStG is to be understood in employment-law terms, not economic terms. This also corresponds to the purpose of the travel expense law applicable from 01/01/2014, according to which there should be a direct link to employment law (BT-Drs. 17/10774, p. 15).

The court also held that the deductible accommodation costs can be estimated using a so-called modified per-capita allocation. Such an allocation had already been applied by the Lower Saxony Fiscal Court for the legal situation before 01/01/2014 and was confirmed by the BFH by order dated 03/07/2018 (BFH/NV 2018, 1145). Such an allocation is also appropriate for the travel expense law applicable from 01/01/2014. This is because it takes into account that a comparable rent for a similar smaller apartment (for one person) is difficult to determine and that the costs for the sole use of an apartment do not decrease linearly with the number of users. Even a one-person household must provide rooms such as a kitchen and bathroom without the costs being significantly reduced. This is reflected by a 20% surcharge on the total costs.

Section 9(1) sentence 3 no. 5a sentence 1 EStG also does not require a reasonableness review of the actual rental expenses. Overnight accommodation costs are the actual expenses for using the accommodation, regardless of the appropriateness of the accommodation (specific hotel category or size of the accommodation) (see also margin no. 119 of the BMF letter dated 25/11/2020).
Leave to appeal was granted, but the tax office did not file an appeal.

BFH: Expenses for renting a car parking space in the context of maintaining two households

Necessary additional expenses incurred by an employee due to maintaining a second household for professional reasons are deductible as income-related expenses according to Section 9 (1) Sentence 3 No. 5 Sentence 1 of the Income Tax Act (EStG) and may be reimbursed tax-free by the employer. The costs of the second home at the place of primary employment are limited to a maximum amount of 1,000 Euros per month (or 2,000 Euros for a residence abroad since 2026) according to Section 9 (1) Sentence 3 No. 5 Sentence 4 EStG.

The Federal Fiscal Court (BFH) ruled in its judgment of November 20, 2025 (Ref. VI R 4/23) that (necessary) costs for renting a car parking space do not fall under the maximum amount, meaning they can be considered in addition to housing costs.

In the case ruled upon, the employee had rented a second home, including an underground parking space for their company car, in an apartment building at the location of their primary employment. The parking space was located in the basement of the apartment building. A separate rental agreement was concluded for the parking space, but its term and notice period were tied to the rental agreement for the apartment. The monthly payment for the apartment, utility advance payments, and parking space was paid monthly in a lump sum via standing order. The monthly maximum amount of 1,000 Euros was already exceeded by the rent for the second home. The employee had to pay 170 Euros per month for the parking space.

The BFH confirmed the lower court’s view that these costs, although high, were still customary for the location and that the question of necessity does not depend on why the employee maintains a car at the place of primary employment, but rather on whether renting a parking space was necessary, for example, due to the parking situation.

According to the BFH, the maximum amount of 1,000 Euros per month only includes costs incurred for the use of the accommodation. For a rented apartment, this includes, for example, gross cold rent, operating costs, and electricity costs. According to the BFH judgment of December 13, 2023 (BStBl. II 2024, 404), the second home tax also belongs to the expenses for the use of the accommodation.

However, expenses for household items and furnishings are not incurred for the use of the accommodation, even if they are used in the accommodation. Therefore, they do not fall under the 1,000 Euro maximum limit (cf. BFH judgment of April 4, 2019, BStBl. 2019 II, 449).

The same applies to parking space or garage costs. These are also not incurred for the use of the accommodation. It is irrelevant whether the apartment and parking space are rented with one rental agreement or two different rental agreements, and possibly from different landlords. Likewise, it is irrelevant whether the apartment and garage/parking space are on the same property. If a single rent is to be paid for the apartment and parking space, an apportionment must be made by estimation, as in the case of a furnished second home.

Employer liability for the energy price lump sum?

To mitigate hardships due to the sharply increased energy costs in 2022, the legislator introduced a one-time energy price lump sum (EPP) of 300 Euros in the Tax Relief Act 2022 of May 23, 2022 (BGBl. I p. 749). This was only granted to individuals subject to unlimited income tax liability (§ 113 EStG). Taxpayers without a residence or habitual abode in Germany, particularly cross-border commuters with limited tax liability, were not supposed to receive the EPP. Employers had to pay out the EPP to employees (taxable) via payroll in September 2022 and deduct the paid amount from the total amount of wage tax to be withheld from the August 2022 wage tax return (for monthly submissions). A prerequisite for the employer to pay out the EPP was that the employee was in a current primary employment relationship on September 1, 2022, and was classified in tax classes 1 to 5 or received flat-rate taxed wages according to Section 40a (2) EStG (§ 117 EStG).

Sections 113 to 122 EStG, which are relevant for the EPP, did not stipulate that Section 42f or Section 42g EStG should be applied analogously. In our opinion, a review of the eligibility for payment within the scope of an external wage tax audit or wage tax inspection was not intended. Nevertheless, the EPP is regularly listed in audit orders for external wage tax audits. A revision procedure is now pending before the BFH, which concerns whether the EPP can be reclaimed from the employer if it was paid out to employees with limited income tax liability (Ref. VI R 24/25).

Among others, the plaintiff employed seasonal workers who (also) had a residence abroad. During the time they worked for the employer, they lived in shared accommodation on the company premises. The ELStAM (electronic wage tax deduction characteristics) were retrieved, and wage tax was deducted according to tax class 1. The employer paid the EPP to the employees in September 2022 and indicated the capital letter “E” in the electronic wage tax certificate. During an external wage tax audit, the tax office took the view that the conditions for the EPP were not met for the seasonal workers, as they were not subject to unlimited tax liability. Since the EPP is granted only to those with unlimited tax liability according to Section 113 EStG, the payment was made incorrectly. The EPP was assessed against the employer according to Section 167 (1) Sentence 1 AO.

However, the Fiscal Court of Münster ruled in its judgment of December 10, 2025 (Ref. 6 K 1524/25 E) that an EPP that may have been wrongly paid out must be reversed between the state and the employee, even if it was to be paid out by the employer. The plaintiff was not obliged to check whether the employees to whom he had to pay the EPP according to Section 117 (1) EStG (current primary employment relationship) also met the requirements of Section 113 EStG (unlimited income tax liability). This is because Section 117 EStG makes the employer’s obligation to pay dependent only on the existence of a current primary employment relationship and classification in tax classes I to V. Further criteria for an obligation to pay (e.g., unlimited tax liability) were not specified in Section 117 EStG. Whether the BFH shares this view remains to be seen. Employers who are held liable for EPPs that may have been wrongly paid out during external wage tax audits should keep the corresponding notices open.

BFH: Employer’s celebration for an employee’s farewell does not lead to employment income

Already in its judgment of January 28, 2003 (BStBl. 2003 II, 724), the BFH ruled that an employer’s expenses for a reception on the occasion of an employee’s birthday do not lead to taxable employment income if it is an “employer’s celebration,” i.e., a company event. The tax authorities apply this jurisprudence and do not classify usual non-cash benefits at a reception on the occasion of an employee’s milestone birthday as employment income if it is an employer’s celebration. However, they consider the pro-rata costs attributable to the employee themselves, invited family members, and private guests of the employee as employment income if the employer’s expenses (incl. VAT) exceed 110 Euros per person. When checking this tax-free limit, gifts up to a total value of 60 Euros must also be included (cf. R 19.2 (2) No. 4 EStG).

Now, the BFH has ruled in its judgment of November 19, 2025 (Ref. VI R 18/24) that expenses for a reception on the occasion of an employee’s retirement also do not lead to employment income if it is an “employer’s celebration.” This also applies to the expenses attributable to the employee and their family members. The BFH does not specify a value limit here.

As before, the question of whether an employer’s celebration exists must be decided by considering all circumstances of the individual case. Ultimately, it is about whether the event has a business or private character. In addition to the occasion of the event, the assessment must include who acts as the host and determines the guest list, and whether the guests are professional contacts (colleagues, business partners, public figures, press, association representatives, etc.) or private contacts (acquaintances or relatives of the taxpayer). However, the presence of a few private guests does not turn a business event into a private celebration. It speaks for an employer’s celebration if the celebration takes place on the employer’s premises and not in the employee’s house/apartment.

In the case ruled upon, a credit institution organized a reception at its business premises on the occasion of the CEO’s departure from the company and retirement, and also introduced the new CEO during this event. The reception was organized by the company. Invitations were issued based on a guest list previously determined according to business-related criteria, independently of the event. Of the approximately 300 invited guests, 8 were family members of the employee; the remaining guests included, for example, former and current board members of the company, selected employees, the supervisory board, public figures from politics, administration, important companies and institutions from the region, representatives of banks and savings banks, associations, chambers, and cultural institutions, as well as press representatives. The BFH ruled that a non-cash benefit only leads to employment income if the recipient is objectively enriched by it. However, if it is an employer’s celebration, such enrichment is absent. This also applies to the pro-rata expenses attributable to the employee and their family members if the family members’ participation in the employer’s celebration is socially customary and the employer issued the invitation.

In the Spotlight

Visa-free Entry to China – Important Exceptions

China has extended visa-free entry for German nationals until the end of 2026. However, in February 2026 the authorities emphasized that the exemption does not apply to all travel purposes. Activities such as, e.g., language courses, artistic performances, media productions, journalistic work, internships or short-term jobs still require a visa. Travelers should carefully review their purpose of travel.

China has extended its unilateral visa-free entry policy for, among others, German nationals until 31 December 2026. This allows travelers to continue entering China without a visa for short-term stays. At the same time, the Chinese authorities pointed out in February 2026 that visa-free entry does not apply to all purposes of travel. To avoid delays at the border or unnecessary travel disruptions, visitors should carefully review their individual situation.

Travel purposes not covered by visa exemption

The Chinese authorities have published a list of common cases in which visa-free entry is not permitted. In these situations, a visa must be obtained in advance:

1. Learning Kung Fu or similar martial arts
   This includes, for example, Meihuaquan or Tai Chi. Training programs or courses are not considered visa-free activities.
2. Participation in language or cultural courses
   Such stays – even short-term ones – do not fall under the permitted purpose.
3. Commercial artistic performances
   Artists who perform in China and earn income must obtain an appropriate work or performance visa.
4. Participation in recordings of TV or online shows
   This applies particularly to entertainment formats. Only sports competitions are exempt.
5. Film and media productions
   Filming for movies, series, documentaries, or commercials is not permitted under the visa-free regime.
6. Journalistic activities
   Interviews, reporting, or filming for news programs require a journalist visa.
7. Internships
   Internships also require a visa.
8. Short-term work assignments
   This includes activities such as teaching assignments or modeling jobs.

Recommendation for travelers

The examples listed cover frequent cases in which the visa exemption cannot be used. However, the list is not exhaustive. Travelers should therefore carefully check whether their individual purpose of travel truly falls under the visa-free entry rules. Anyone who is unsure should apply for a visa in good time to avoid entry refusals, delays, or financial losses. In cases of doubt, the competent Chinese diplomatic mission should be contacted.

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