(2023)
Maintenance payments: Cash payments for relatives abroad deductible
Many foreign nationals in Germany financially support their family members in their home country. The tax office imposes strict requirements on the proof of these maintenance payments and the recipients' need. Cash transfers via intermediaries, including neutral transport companies, are generally not recognised for tax reduction purposes (BMF letter dated 7.6.2010).
An exception applies only if there are special circumstances in the country of residence, such as a crisis situation, and no other payment method is possible. In such cases, the identity of the intermediary, the exact travel itinerary, and complete proof of the origin of the money in Germany and its handover to the recipient must be documented. This includes evidence such as tickets, fuel receipts, border crossing stamps, flight tickets, and visas.
A court ruling from Baden-Württemberg in 2016 decided that maintenance payments to close relatives in Italy are tax-deductible under certain conditions. One case describes how a guest worker transferred maintenance payments to his parents in Italy, with cash amounts personally delivered by an acquaintance who regularly travelled to southern Italy.
The tax judges accepted the maintenance expenses after hearing the money courier as a witness, as the details of the trips and money transfers were credible and consistent. (FG Baden-Württemberg dated 21.7.2015, 8 K 3609/13, published on 2.3.2016).
The Federal Ministry of Finance has currently clarified in comprehensive decrees how maintenance payments can be deducted for tax purposes, especially for payments to family members living abroad (BMF letter dated 6.4.2022, IV C 8-S 2285/19/10002 :001 and 10003 :001). Here are the key points:
- Transfers to relatives living abroad must generally be proven by postal or bank receipts identifying the recipient. If several people in the same household are supported, it is sufficient if the receipts are issued to one of the household members.
- Payments to foreign accounts not in the recipient's name require, in addition to the German proof, a bank certificate of account authorisation and payment details.
- Alternatively, other payment methods can be used if they are sufficiently proven. For cash payments and other methods, there are increased proof requirements. This includes withdrawal receipts, detailed recipient confirmations, and a clear temporal connection between withdrawal and handover, which must not exceed two weeks. The journey must be proven by tickets, fuel receipts, border controls, flight tickets, or visas.
- Under certain conditions, family visits by the taxpayer ("family journeys home") to their supported family abroad are tax-deductible. However, the agreements do not apply if the taxpayer's spouse lives in Germany and the taxpayer only visits their children or parents abroad.
- Employees can usually claim a net monthly wage per family journey home for the maintenance of the spouse, children, and other relatives living in the household. This regulation applies to up to four trips per calendar year.
- Money transfer through intermediaries such as neutral transport companies are generally not recognised for tax reduction purposes. An exception applies only if there are special circumstances in the country of residence, such as a crisis, and no other payment method is possible. In such cases, the identity of the intermediary, the travel itinerary, and complete proof of the money's origin and handover must be documented. The journey must be proven by appropriate evidence such as tickets, fuel receipts, border controls, flight tickets, or visas.
- For each money transfer, a recipient confirmation must be issued, containing the names, addresses, date and signature of the recipient, as well as the place and time of the money transfer. The confirmation must be issued immediately upon handover to maintain its evidential value. Confirmations issued later or summarised do not meet the proof requirements.
Maintenance payments are deductible as extraordinary expenses up to the maximum amount of 10,908 Euro (2023) without crediting a reasonable burden. However, own income and receipts above 624 Euro per year are credited.
The maintenance maximum amount and credit exemption 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: Maintenance payments can only be considered for tax purposes until the end of the year, and the maximum amount for payments made during the year must be proportionally allocated to the year (BFH ruling dated 25.4.2018, VI R 35/16).
