Non-timely flat-rate taxation for company events leads to social security liability!
Non-timely flat-rate taxation for company events leads to social security liability!
If the tax-free allowance of EUR 110 or the number of 2 favoured events per year is exceeded for company events, these benefits to employees constitute wages subject to tax and social security contributions. However, according to § 40 para. 2 sentence 1 no. 2 EStG, there is the option of flat-rate taxation. These flat-rate taxed benefits then no longer constitute remuneration within the meaning of social insurance and are therefore not subject to contributions. However, as the Federal Social Court states in a recent decision (case no. B 12 BA 3/22 R; press release dated 23 April 2024), time-related aspects must be taken into account in this respect.
A company celebrated a business anniversary with its employees in September 2015. It did not pay the flat-rate tax declared for over 160 employees on the costs incurred of around EUR 163,000 until the end of March 2016. In view of this significant delay, the responsible pension insurance provider refused to exempt the benefits from contributions and demanded social security contributions and levies totalling around EUR 60,000. The Federal Social Court took the same view and overturned the decisions of the lower courts to the contrary.
According to the relevant regulation (Section 1 para. 1 sentence 2 SvEV), the decisive factor is that the flat-rate taxation takes place "with the pay slip for the respective payroll period". In this specific case, this would have been the pay slip for September 2015. However, the flat-rate taxation was not actually carried out until the end of March 2016 and therefore even after the date on which the wage tax statement for the previous year must be submitted. The delayed flat-rate taxation therefore means that these expenses were recognised as a non-cash benefit and social security contributions were levied retrospectively.
The press release of the Federal Social Court states that the end of March 2016 is even later than the date on which the wage tax statement for the previous year must be submitted. This corresponds to the usual procedure in practice based on an agreement reached by the social insurance associations in 2016: changes permitted under tax law that the employer has made itself due to a previously incorrect assessment under tax and contribution law up to the preparation of the wage tax statement on 28 February of the following year must be taken into account when assessing the obligation to pay contributions and can thus lead to exemption from contributions. However, this is not explicitly stated, at least not in the press release. It remains to be seen whether the reasons for the ruling will contain further explanations, especially as this question was not relevant in the case in question.
Notice:
When planning and organising events, companies must also take care regarding taxes and social security and include these in the organisational processes. Correct and prompt flat-rate taxation is essential to avoid unexpected additional claims from social insurance providers. In this respect, it is not possible to catch up or make corrections later. The fact that a different approach can be taken to flat-rate taxation under tax law does not change the assessment under social insurance law.
In addition to wages for company events, other flat-rate situations are likely to be affected, so that special attention is also required here when determining the facts and the assessment bases:
- Free or reduced-price provision of meals on working days
- Allowances for additional meal expenses insofar as the tax-free lump sums are not exceeded by more than 100%
- Free or discounted transfer of ownership of data processing devices such as smartphones or tablets
- Transfer of ownership of charging devices for electric vehicles free of charge or at a reduced price
- Transfer of ownership of bicycles free of charge or at a reduced price
- Travel allowances for journeys between home and first place of work
As the latest reports from external payroll tax audits are regularly used in the context of social security audits, it should be easy for social security auditors to identify the relevant facts.
There is also a risk that the employer will be held liable for the employee contributions due to the employer's social security contributions. The risk can therefore quickly amount to 40 % of the incorrect or non-flat-rate wages, as the above judgement makes clear.