How are multiple training courses assessed as a single measure?
Many children go through several stages of training before reaching their career goal, such as an apprenticeship followed by a degree or technical school. Previous regulations distinguished between initial training (e.g. apprenticeship) and further training (e.g. subsequent degree). The costs for initial training could only be deducted as special expenses to a limited extent, while the costs for further training could be deducted as business expenses without limit.
Child benefit is only available for further training if the child works no more than 20 hours per week.
New legal situation: Multi-stage training
Under the new legal situation, further training after the first can be considered part of the initial training if the child has not yet reached their career goal. This is known as multi-stage training. The condition is that the further training is closely related in terms of subject and time to the first training (BFH ruling of 15.4.2015, V R 27/14).
Advantages of multi-stage training
For parents: As long as the training is considered initial training, there is still an entitlement to child benefit and tax allowances, regardless of whether the child works during this time.
For the child: After the first professional qualification, the costs for further training can be deducted as business expenses without limit.
What applies to the deduction of business expenses?
Even if multi-stage training counts as initial training for child benefit, the term initial training remains for the deduction of business expenses. Initial training in terms of business expense deduction lasts at least 12 months full-time and ends with an exam. From the second training onwards, costs can be fully deducted as business expenses and losses can be carried forward to subsequent years.
Example: Multi-stage training
Hans completed his apprenticeship as an electrician in February 2012 and then wanted to attend a technical college to qualify for a degree at a university of applied sciences. Between March and July 2012, he worked full-time in his trained profession. Although he worked full-time during this waiting period, the Federal Fiscal Court (BFH) recognised his training as multi-stage training. The apprenticeship, technical college, and subsequent degree are closely related in terms of subject and time. Hans is therefore entitled to child benefit for the entire training period.
Conclusion: Multi-stage training extends the concept of initial training, which positively affects the entitlement to child benefit and tax advantages. While the training is still considered initial training, parents can receive child benefit and children can deduct the costs of further training as business expenses.
As if the matter weren't already complicated enough:
The BFH has recently issued a series of rulings on further cases and clarified its view - but unfortunately also complicated it. Ultimately, it can be noted that child benefit is denied whenever further studies or training are carried out "only alongside work". However, part-time jobs are harmless (BFH rulings of 11.12.2018, III R 22/18, III R 2/18, III R 32/17, III R 47/17). The cases in which the family benefits office denied child benefit for further training included:
Case 1: The son first completed training as a bank clerk. He then worked full-time at the bank where he had trained. A few months after the end of the "initial training", the son took part in a two-year part-time further training course to become a bank specialist. The BFH has not yet made a final decision but has indicated that it will not grant child benefit because the training to become a bank specialist is likely to be considered part-time further training. The matter was referred back to the lower court.
Case 2: The daughter first completed an apprenticeship as a bank clerk. Shortly after the end of the training, she began a course of study at a vocational college in marketing. The state-recognised course with the qualification "State-certified business economist" was part-time. At the same time, the daughter was employed first at the bank and later at a car dealership. The weekly working hours were 40 hours each. Here too, the BFH has not made a final decision. The lower court must examine whether the training relationship was subordinate to the employment relationship or vice versa. It is likely that child benefit will be lost.
Case 3: The son passed the exam in the training occupation of electrician specialising in energy and building technology and was taken on by his training company in the same month with a weekly working time of 38 hours. A few months later, the son attended the two-year evening course to become an industrial foreman in electrical engineering IHK. The matter was referred back to the tax court, which must now examine whether the training or the job was the priority. There is much to suggest that the job was the priority and therefore no child benefit entitlement exists.
Case 4: The daughter completed her training as a tax clerk. She was then taken on by her previous training company in full-time employment. Immediately after the exam, the daughter enrolled at the business school to obtain the qualification of State-certified business economist in business administration (focus on taxes). The part-time training lasted 3 1/2 years. In this case too, the tax court must decide again after the BFH referred the case back, taking into account its new principles. As in the three previous cases, it is not very likely that the parents will win the legal dispute.
In three further rulings, the issue was child benefit for daughters who each completed a part-time course to become an administrative specialist after training as an administrative clerk (BFH ruling of 20.2.2019, III R 42/18; BFH rulings of 10.4.2019, III R 51/18 and III R 33/18). In six cases, the issue was child benefit for children who each took up a part-time course of study to become a bank specialist or a finance or economics degree after training as a bank clerk (BFH rulings of 21.3.2019, III R 12/18, III R 16/18, III R 17/18, III R 40/18 and III R 50/18; BFH ruling of 10.4.2019, III R 19/18). The tenth ruling concerned child benefit for a son who, after training as an industrial mechanic and master training, completed the advancement to "Certified Technical Business Administrator" (BFH ruling of 21.3.2019, III R 18/18).
All cases have been referred back to the lower courts for further clarification. However, the BFH has already indicated that child benefit will be denied if the children worked full-time alongside and the further training was not the priority over the job.
The Federal Fiscal Court has recently ruled that child benefit is no longer applicable if the child works more than 20 hours in the financial administration after completing training as a graduate financial economist and studies law in their free time (BFH ruling of 7.4.2022, III R 22/21).
Checklist:
The case law on child benefit for further studies or additional training has become extremely complicated. However, the following checklist can help determine whether child benefit is to be granted:
- Is it training or a course of study that builds on the first training? If yes: continue with 2. If no, it is effectively a different "field": Child benefit is only granted if no employment or employment of more than 20 hours per week is carried out alongside.
- Is there a temporal connection between the two training phases? If yes: continue with 3. If no: Child benefit is only granted if no employment or employment of more than 20 hours per week is carried out alongside.
Note: If the son or daughter only registered for the next possible training phase (e.g. a master course) several months after passing the first training (e.g. the journeyman's exam), this does not speak against linking the training phases (BFH 11.12.2018, III R 32/17).
- Is the child already using the qualification obtained after the first degree for a job they are now actually doing? If yes: There is much to suggest that the further training is no longer part of a "comprehensive training". Consequence: Child benefit for further training will probably not be granted as employment has taken priority. If no: The child benefit entitlement could be retained as the further training is the priority. However, an overall assessment with point 4 must be made in both cases.
Examples: If, for example, a journeyman or clerk is taken on by their training company in the profession they have learned, or a bachelor takes up a position opened up by this degree, this can be an indication that employment has taken priority. According to the BFH, such a situation suggests that further training measures only serve professional development or higher qualification in an already started and practised profession.
If, on the other hand, the child takes up a job that would have been open to them without the degree obtained (e.g. temporary work in gastronomy or retail) or if the employment is typically not a permanent job (e.g. a bachelor working 19 hours as a research assistant during the subsequent master's degree and giving 3 tutoring hours per week), this can indicate a priority training.
- Is the employment subordinate to the further training and is the training therefore carried out alongside work according to its external appearance? If yes: In the overall assessment with point 3, child benefit will probably be lost. If no: Child benefit is likely to be retained in the overall assessment with point 3, as the training is the priority. Employment of more than 20 hours per week speaks against the granting of child benefit. However, if the 20-hour limit is only slightly exceeded, this may be harmless and the training may still be the priority. For a priority training, it also depends on the time ratio between employment and training measures.
Examples: If, for example, a part-time job of regularly 22 hours per week is arranged to fit the respective training plan, this is an indication of priority training. The same applies if the child works a maximum of 20 hours per week during the semester but reaches an average working time of more than 20 hours per week due to increased weekly hours during the semester break.
If, on the other hand, the child works almost full-time and the training measures are only carried out in the evening and at weekends, this indicates that the further training measures are only carried out alongside employment. Finally, it can also be important whether and to what extent the employment and training measures are coordinated with each other beyond the time aspect.
Note: For the sake of good order, it should be pointed out here that the same applies to the question of granting the child allowance.
