The tax deduction pursuant to § 50a EStG within the framework of the limited tax liability was amended by the law for the modernisation of the relief of deduction taxes and the certificate of capital gains tax (AbzStEntModG) of 2.6.2021. This law mainly modifies the procedural law in the context of tax deduction. The literature warns that the new law for companies will require significant changes in the compliance process. We explain the new changes and examine their impact.

We discuss whether you can avoid your limited and unlimited tax liability and do not have to pay taxes anywhere.

The tax application according to § 50a EStG has some special features. First of all, a tax application is a tax declaration within the meaning of § 150 I AO. The subject matter of this tax declaration is the tax actually withheld by the debtor of the remuneration as part of the tax deduction. Thus, the actual tax and not the target tax, which designates the tax that is actually to be retained, must be specified. The reason for this is the deviating wording of the law in the context of the tax deduction procedure according to § 50a EStG to the legal wording in the context of the payroll tax deduction procedure. This therefore establishes the central difference between the tax deduction obligation under the withholding tax and the payroll tax deduction.

Accordingly, it had to be stated in the tax application that the person liable for the remuneration of more specific remunerations of a named creditor made the tax deduction and made him a tax deduction obligation. Therefore, the tax declaration did not contain any tax assessment vis-à-vis the limited taxpayer. Rather, it contained only the determination of the payment debt of the person liable for the deduction. Therefore, the tax declaration had third-party effect only to the extent that it entitles the remuneration creditor not to pay the entire remuneration contractually owed to the remuneration creditor, but to retain a part and pay it to the Treasury.

The tax notification obligation therefore fell short of the tax deduction obligation. This led to problems in particular in the case of taxes not withheld in breach of duty. There was a tax deduction obligation and the possibility to make use of the deductible under the liability Nevertheless, there was no corresponding obligation to submit the tax declaration. In the case of intentional or reckless non-withholding of the tax deduction amount, the sanction of the non-voluntary § 380 I AO came into consideration. Nevertheless, no delay surcharge could be charged according to § 152 I AO. The reason for this is that this requires the obligation to submit a tax return, which does not exist as proven.

The aforementioned problem led the legislator to change the current law on tax deduction. According to § 50 III 3 EStG, the remuneration debtor must file the tax to be withheld within one calendar year and pay the withheld tax to the Federal Central Office for Taxes. As a result, there is now in all cases actually a tax registration obligation. In addition, the target control principle now applies. This means that the tax actually payable must be declared. As a result, if an incorrect non-retention is subsequently detected, the quarterly tax application is incorrect as measured at the target in relation to the relevant situation. It should therefore be corrected accordingly.

2.2.1. New procedural rules

Furthermore, the discharge procedure has been modified, which applies if the taxpayer can rely on an exemption of his income. In Germany, a two-stage procedure is provided for taking into account the taxpayer’s entitlement to relief. Therefore, the debtor of the remuneration is in principle obliged to withhold and pay the tax regardless of double taxation agreements and directives. After payment of the tax, the creditor can apply to the Federal Central Office for Taxes for reimbursement of the overpaid tax.

The consequence of this is that the tax administration can ask the debtor in the context of an audit to make up for the tax deduction that has been omitted in breach of duty. This applies even if it is clear that the creditor is entitled to full discharge. An objection to a liability decision based on this consideration is therefore also not possible. The debtor can only refrain from withholding and paying the deduction tax if the Federal Central Tax Office has officially confirmed to the taxpayer that he is entitled to relief. What is new is that the debtor of the remuneration can already take into account the creditor’s claim for relief under a double taxation agreement when making the tax deduction if it concerns income within the meaning of § 50a I No. 3 EStG and certain thresholds are not exceeded. Nevertheless, there is still an obligation to submit the tax declaration. This serves to ensure that the BZSt can better monitor the avoidance of exemptions.

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2.2.2. Conditions of exemption

The granting of the certificate of exemption no longer requires that the income actually meets one of the facts of § 50a I EStG. Rather, it can already be granted if the existence of a tax deduction obligation is only doubtful, but a German taxation law with regard to the actual income certainly does not exist or only a reduced tax rate is applied. In practice, this facilitates the procedure. The further innovation that the exemption certificate no longer has to be actually available to the debtor at the time of payment will be of little importance in practice. The debtor will protect himself from being claimed as a liability debtor and therefore request the certificate of exemption.

Central to the modification of the tax deduction obligation is its conversion as target taxation. As a result, the most varied case designs require an individual examination, for which, however, as a rule, deeper knowledge is necessary. This means additional expenses for those obliged to deduct.