SteuerGo FAQs

(2022) Maintenance payments: Cash payments for relatives abroad deductible

Many foreign nationals living and working in Germany support their relatives abroad. In such cases, the tax office imposes stricter requirements for proof of maintenance payments and the recipient's need. Often, cash amounts for relatives are also given to intermediaries travelling to the home country.

An intermediary can also be a neutral commercial transport company. The tax office generally does not recognise such a cash transfer for tax reduction purposes (BMF letter dated 7.6.2010, BStBl. 2010 II p. 588, para. 17).

An exception is only made if, due to the special situation in the country of residence (e.g. crisis area), no other payment method is possible. In this case, you must document the identity of the intermediary (name and address), the exact travel itinerary, and provide complete proof of the origin of the money in Germany and its handover to the maintenance recipient. The journey itself must be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

Currently, the Baden-Württemberg Finance Court has slightly relaxed the strict view of the tax authorities and decided that maintenance payments to close relatives in Italy are also tax-deductible if the cash is handed over via couriers and if the delivery can be proven by questioning the courier as a witness (FG Baden-Württemberg dated 21.7.2015, 8 K 3609/13, published on 2.3.2016).

The case: An Italian guest worker wants to deduct maintenance payments of 6.000 Euro as extraordinary expenses, which he made to his parents living in Italy. 200 Euro had been transferred via money order to an Italian bank, the other amounts of 1.800 Euro and 4.000 Euro had been withdrawn from his bank account and given to a friend who worked as a food importer and therefore made regular trips to southern Italy.

The father had been unemployed for a long time, and the mother had only a small income from part-time work as a cleaner. The parents did not have their own bank account. The tax office did not recognise the maintenance expenses. The finance judges saw this differently after questioning the courier as a witness. The witness's detailed account of the trips to Italy and the handover of the cash amounts was considered credible and consistent by the finance court.

 

Currently, the Federal Ministry of Finance has issued two comprehensive decrees on the deduction of maintenance payments, including the question of proof of maintenance payments. There are several points to consider, especially for payments to relatives living abroad (BMF letter dated 6.4.2022, IV C 8-S 2285/19/10002 :001 and 10003 :001). Among other things, the following applies:

Transfers to relatives abroad must generally be proven by postal or bank documents (booking confirmations or account statements) showing the person being supported as the recipient. If several people living in a shared household are supported, it is sufficient if the transfer documents are in the name of one of these people. For transfers to an account abroad not in the name of the person being supported, a bank certificate is required, confirming the account authorisation and the time, amount, and recipient of the payment.

The taxpayer can also choose another payment method if the maintenance payment made in this way is sufficiently proven. For cash maintenance payments and all other payment methods, increased proof requirements must be met. Withdrawal receipts and detailed recipient confirmations are required. There must be a sufficient factual connection (period of no more than two weeks) between the withdrawal and the respective cash handover. The journey must always be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

There are easements for family visits by the taxpayer to his supported family living abroad. A family visit only occurs if the taxpayer visits his spouse living abroad, who continues to maintain the family household there. If the spouse also lives in Germany and the taxpayer only visits his children or parents living abroad, it is not considered a family visit, and increased proof requirements apply again.

For employees, it can generally be assumed that the taxpayer takes a net monthly wage for the maintenance of the spouse, children, and other relatives living in the spouse's household on each family visit. This proof easement applies only to up to four family visits per calendar year that are proven. However, within the framework of the proof easement, a maximum amount can be claimed, which results when the fourfold net monthly wage is reduced by payments made and proven or credibly demonstrated in other ways. If the taxpayer claims higher expenses than (flat rate) the fourfold net monthly wage, all payments must be proven according to the general principles.

Cash transfer through an intermediary (this also includes a neutral commercial transport company) can generally not be recognised. This does not apply if, due to the special situation in the country of residence (e.g. crisis area), no other payment method is possible. In this case, in addition to the identity of the intermediary (name and address), the exact travel itinerary must be presented, and complete proof of the origin of the money in Germany and every single step until the handover to the person being supported must be provided. The journey by a private intermediary must always be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

A recipient confirmation must be issued for the handover of each individual amount of money. It must include the name and address of the taxpayer and the person being supported, the date of issue and the recipient's signature, as well as the place and time of the cash handover. To fulfil its intended proof function, it must be issued in exchange for the cash amount. Subsequently issued or combined recipient confirmations do not meet the proof requirements.

 

Maintenance payments are deductible as extraordinary expenses up to the maximum amount of 10.437 Euro (2022) without crediting a reasonable burden. However, own income and benefits above 624 Euro per year are credited.

The maintenance maximum amount and credit allowance are reduced according to the country group classification by one, two, or three quarters if the maintenance recipient lives in a country with a lower standard of living.

 

Attention: The Federal Fiscal Court has recently ruled as follows: Maintenance payments can only be considered for tax purposes until the end of the year, and the maximum amount is prorated monthly for payments made during the year (BFH ruling dated 25.4.2018, VI R 35/16).

The case: The son-in-law makes a maintenance payment of 3.000 Euro in December 2010 to his father-in-law living in Brazil, intended for a whole year. Monthly payments were not feasible due to high fees for international transfers. However, the tax office only recognises this payment with one-twelfth of the maximum amount (for December), as maintenance payments are only deductible if they serve the ongoing living needs of the supported person in the calendar year of the payment. The Nuremberg Finance Court had recognised the entire payment in 2010. The BFH has now contradicted this.