(2023)
What impact does my child's stay abroad have on the child allowance?
The child allowance and the BEA allowance (allowance for care, education or training needs) are both independent of your child's place of residence. However, you as a parent must be fully liable to income tax in Germany.
However, the place of residence of the child is decisive for the amount of the child allowance, as the allowance is reduced by one, two or three quarters depending on the country. To assess the local cost of living, the Federal Ministry of Finance issues a country group classification.
The country group classification is relevant whenever children are abroad and affects
- the child allowance,
- the BEA allowance (for care, education and training),
- the amount of the training allowance,
- the calculation of childcare costs.
Short-term stays abroad, such as holidays, do not lead to a reduction. This also applies to temporary stays, such as for vocational training.
Note: You are also entitled to child benefit for children living in an EU or EEA country, unless benefits comparable to German child benefit are already being paid abroad. Double funding is to be excluded. The prerequisite is that the child is fundamentally to be taken into account, i.e. is of compulsory school age or, for example, is studying and has not yet reached the age of 25.
If the child is staying outside the EU or EEA for training purposes, another important condition applies: To receive child benefit, the place of residence or at least the usual place of residence must (continue to) be in Germany. In simple terms: if a child lives permanently in a third country outside the EU and EEA, such as the USA, there is no entitlement to child benefit in Germany. Child benefit is only paid if the child stays in Germany at least temporarily and actually maintains their residence in Germany.
Currently, the Federal Fiscal Court has ruled as follows: If a minor child who initially lived in Germany stays outside the EU and EEA for more than a year for training purposes, they retain their residence in Germany in the home of one or both parents only if,
- they have rooms in this home suitable for permanent living,
- they can use them at any time, and
- they actually use them with a certain regularity.
In general, the residence in Germany is only maintained if the child actually uses this home for at least the majority of the training-free periods, i.e. school or semester holidays (BFH ruling of 28.4.2022, III R 12/20). In the case in question, a child lived for more than a year in a third country with their grandparents to learn Arabic at school. The BFH did not make a final decision but referred the case back to the lower court. The lower court must now make findings on the existence of a residence in Germany, as the investigation of the facts was incomplete.
Tip
For the retention of a residence in Germany at the parents' home during multi-year stays abroad, only short visits, usually based on the parent-child relationship, are regularly not sufficient. A lack of financial means for the child's home visits cannot compensate for the lack of significant stays in Germany during the training-free periods (BFH ruling of 25.9.2014, III R 10/14). The BFH judges do point out that all circumstances of the individual case must be considered when determining whether the residence in Germany has been maintained. However, in the end, it will be important whether the child travelled home during the holidays and spent the holidays mostly with the parents. Parents should definitely take precautions with their child to provide evidence, such as keeping train and flight tickets, making copies of the passport, presenting study plans, etc.
Tip
The Federal Fiscal Court has recently ruled that a child does not give up their residence at the parents' home if the study abroad - for example in Australia or the USA - is initially planned for only one year. The child benefit entitlement therefore remains. In the case of a multi-year stay abroad, a child usually retains their residence in Germany at the parents' home only if they spend the majority of the training-free periods in Germany and the stays in Germany allow conclusions to be drawn about interim living (BFH ruling of 21.6.2023, III R 11/21).
If a stay abroad was initially planned for only one year, but the child decides to extend the stay, the criteria for a multi-year stay abroad apply (only) from the point at which the child decides to extend. The absence of stays in Germany during the first year does not result in the loss of residence. In the first year, child benefit is therefore retained. From the decision to stay abroad for more than one year for training purposes, the child usually retains their residence in Germany only if they regularly spend more than half of the training-free period in Germany and use the German home - apart from short interruptions. This also applies if the child decides from year to year to extend their stay abroad by one year at a time.
When determining whether the training-free period was mostly spent in Germany, a purely factual (objective) assessment is required. If travel was not possible due to lack of funds or due to travel restrictions related to the coronavirus, this may be detrimental to the child benefit entitlement. This is at least the view of the Bremen Finance Court in its ruling of 7.3.2023 (2 K 27/21 (1)).
Tip
For the sake of good order, it should be noted that there are special features regarding child benefit in connection with countries with which a social security agreement exists (e.g. Turkey).
