(2023)
Should the work-related expenses be reduced by the master's bonus?
Training to become a master craftsman is expensive, and the expenses are tax-deductible as business expenses. Some federal states have been paying a master craftsman bonus for some time to emphasise the equivalence of vocational and general education. The aim is to create an incentive to pursue further vocational training and strengthen one's qualifications. However, the question is whether the business expenses must be reduced by the bonus.
In Bavaria, since 1 September 2013, every successful graduate of vocational training to become a master craftsman or equivalent qualification has received a master craftsman bonus of 1.000 Euro. The relevant directive is valid until 31 December 2016.
In Saxony, the master craftsman bonus programme was also approved, whereby from 1 September 2016, at master craftsman celebrations, master craftsmen in trades, industry, and specialist fields not only receive their master craftsman certificates but also a bonus of 1.000 Euro. In Rhineland-Palatinate, the SPD has included the introduction of a master craftsman bonus in its government programme, and the state of Mecklenburg-Western Pomerania has been honouring the successful completion of master craftsmen in trades and industry with a master craftsman extra of 1.000 Euro since 1 January 2016.
The Munich Tax Court has ruled that the training costs for the master craftsman examination, which are deductible as business expenses, do not have to be reduced by the master craftsman bonus paid out. The bonus is not taxable income, is not associated with a type of income, and is not linked to earning income. Therefore, it is not a tax-free scholarship according to § 3 No. 44 EStG or educational funding according to § 3 No. 11 EStG. The master craftsman bonus is paid not because of the expenses but solely because of the successful completion (FG Munich of 30 May 2016, 15 K 474/16).
The tax authorities accept the decision of the tax court and leave the master craftsman bonus not only tax-free but also non-deductible for business expenses (Bavarian State Office for Taxes of 6 July 2016, S 2324.2.1-262/6 St32). In Saxony and Mecklenburg-Western Pomerania, reference should be made to the BayLfSt directive in comparable cases, as the master craftsman bonus or master craftsman extra pursues the same objectives as the bonus in Bavaria.
Current: Under the Upgrading Training Assistance Act (AFBG), those preparing for a training qualification as a master craftsman in trades and industry, educator, technician, business administrator, or one of more than 700 comparable qualifications are supported (so-called Meister-BAföG). The support includes grants that do not have to be repaid, as well as low-interest loans. Anyone taking out a loan for training can claim the interest as business expenses for tax purposes. What happens if the loan is partially waived after passing the exam (according to § 13b para. 1 AFBG)?
Current The Lower Saxony Tax Court has ruled that the loan waiver is not income and therefore remains tax-free. Since the loan agreement is with the bank - Kreditanstalt für Wiederaufbau - the payment is not to be treated as an employer benefit for tax purposes. Therefore, the loan waiver is not related to the employment relationship (FG Lower Saxony of 31 March 2021, 14 K 47/20, revision VI R 9/21).
The case: An employee takes out a KfW loan for her training as an industrial supervisor under the Upgrading Training Assistance Act. The loan agreement states that 50% of the loan will be waived if the exam is passed. After passing the exam, the tax office levied income tax on the waiver. The reason given was that the waiver replaced the business expenses and had to be taxed as income from employment. The tax court ruled in favour of the employee. The judges saw no income and left the loan waiver tax-free.
