According to the Federal Fiscal Court (BFH, VI R 20/20), remuneration paid by an employer to its employees for advertising by the employer on the license plate holder of the employee’s private car is remuneration for work if the “advertising rental agreement” concluded has no independent economic substance.
Not every payment made by an employer to its employees constitutes wages. Rather, an employer may conclude further independent contracts with its employees in addition to the employment contract. However, if a separately concluded contract does not have an independent economic content, it may be a further payment of wages and salaries.
An employer had concluded “advertising rental agreements” with some of its employees. Under these agreements, the employees undertook to attach license plate holders bearing the employer’s advertising to their private cars. In return, they received 255 euros per year. The employer treated the “advertising fee” as other income in accordance with the Income Tax Act (Section 22 No. 3 EStG) and therefore did not withhold any wage tax. This was also advantageous for the employees, since such income is tax-free below an amount of 256 euros per year. However, the tax office assumed that the payments were wage payments and held the employer liable for wage tax not withheld and paid – and rightly so, as the FG Münster and the BFH ruled. The payments are part of the income from employment because they are caused by the employment relationship and are not based on a special legal relationship “rental agreement for advertising space”, as this does not have its own economic content.
In particular, the BFH considered the following assessments of the lower court to be not only possible, but also obvious: The separately concluded “Rental Agreement for Advertising Space” did not have its own economic substance, taking into account the offers available on the market, if only because of its structure. This is because the achievement of an advertising effect was not ensured and the assessment of the remuneration was obviously oriented to the exemption limit regulated in the Income Tax Act. The advertising effect was not – as is customary in commercial transactions – the decisive criterion for the assessment of the remuneration. The FG took into account that contracts were concluded exclusively with employees and that the term of the contracts was linked to the existence of the employment relationship. (Source: Press release of the court)
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