Lawyers Dr. Haufs-Brusberg & Kollegen from Trier, speaking to German news site Lokalo.de, revealed that a case brought against the Trier Tax Office may have far-reaching ramifications.
The Finanzgericht Rheinland-Pfalz declared the agreement on the double taxation law applied to Luxembourg was ineffective, at least in relation to the taxable persons.
About the case:
A bus driver, who lives in Germany, transports commuters from Trier to Luxembourg and back on a typical working day for a Luxembourg bus company.
He told the tax office faithfully and honestly that he had driven his annual work assignment in Luxembourg and in Germany adhering to the national limits set, and according to the rosters and work lists sent to, and evaluated by, both country’s tax offices.
The issue in this particular, and long-standing, case revolves around the declaring which jurisdiction the secondary tax is liable.
It is true that the double taxation agreement with Luxembourg actually provides that only remuneration may be taxed in the State in which the work is actually carried out.
In this case, the ‘agreement of 07.09.2011' is said to apply: in the case of professional drivers, the salary must be taxed ‘equally’ in Germany as it is in Luxembourg for activities carried out in both countries.
This is completely independent of the actual “physical presence” at work and in the case of the bus driver, the vast majority of his work took place in Luxembourg. After the applicant filed a complaint before the Finanzgericht Rheinland-Pfalz declaring that he could prove that he had worked only marginally in Germany, it was adjudged that the double taxation law was void.
As of 7 October 2020 (1 K 1272/18), the German 1st Senate of the General Court operates with a system of taxation according to the place of activity. This in and of itself deviates from the principle of the double taxation agreement.
However according to ‘basic law’ the taxation of a national is founded on a required legal basis.
If the works had been carried out in a manner more in line with a 50/50 basis, the case would not have been so clear cut.
As it stood, the driver had operated between 109,343 and 120,960 hours in Luxembourg and circa 19,951 to 26,315 in Germany (these variable depending on traffic flow etc etc).
It took the bus driver years to get the case resolved, after initially filing in 2011 and though the precedent does not mean a whole scale ratification of the law it has brought into focus the need for the employee (and in part the employer) to clearly log and document cross-border activity.
What does the verdict mean for those affected or those that have cause to query double taxation?
According to Johannes Haufs-Brusberg it is up to taxpayers to counteract a flat-rate, half-taxation policy approach by means of a minute-by-minute explanation of the activity carried out and of the country of activity.
