Remuneration for car number plate advertising is remuneration for work

In addition to wages and salaries, remuneration for work also includes other earnings and benefits that are granted for employment in public or private service, i.e., that are caused by the individual employment relationship. It is irrelevant whether these are current or one-off payments and whether there is a legal claim to them. In contrast, there is no remuneration for work if a payment is granted because of other legal relationships or because of other relationships between the employee and the employer that are not based on the employment relationship (so-called special legal relationship).

In order to clarify the question whether it concerns remuneration for work or a payment within the scope of a special legal relationship, a verification is to be made according to the economic content of the facts of the life; however, the external appearance of the underlying agreement is not important. Against this background, the German Federal Fiscal Court (Bundesfinanzhof, BFH) had to decide in its ruling of June 21, 2022 (Case No. VI R 20/20) whether the remuneration paid by the employer for the attachment of a number plate holder with advertising on the employee’s private car constitutes remuneration for work or a payment within the scope of a special legal relationship.

In the case in question, an employer concluded contracts with a large number of his/her employees, referred to as “rental contracts for advertising space”, in which the employees agreed to attach number plate holders provided by the employer and bearing advertising lettering to their private cars. In return, the employees received an annual payment of EUR 255. The contracts were limited to the duration of the employment relationship and could be terminated by either party with a two months’ period. The tax office classified the above-mentioned payment as remuneration for work and made a claim against the employer with a liability notice for the payroll tax that had not been withheld and paid. The tax court of first instance and the German Federal Fiscal Court agreed.

Accordingly, the payments at issue are part of the income from employment. This is because they are induced by the employment relationship and are not based on a special legal relationship “rental contract for advertising space”, since this does not have its own economic content, in particular because it does not ensure a targeted advertising effect. Furthermore, the contracts were concluded exclusively with employees and were linked to the existence of an employment relationship with regard to their term.

Some indications (e.g., conclusion of the contract not with all employees, conclusion of a separate contract designated in writing as “rental contract for advertising space” as well as the possibility to terminate the contract with simultaneous continuation of the employment relationship) could speak in favour of the disputed payments being caused by a special legal relationship “rental contract for advertising space” with its own economic content. In the context of the verification of the overall circumstances, however, these were not decisive in the case in question.