Social security - Obligation to pay contributions in the event of a delay in flat-rate taxation
In the case of certain employee benefits, it is generally known that there is an option to charge flat-rate payroll tax for these at specific flat rates. This applies, for example, to subsidies for travel costs, short-distance public transport season tickets or the provision of meals. Employers bear the flat-rate tax charge. Normally, paying the tax on a flat-rate basis results in not having to pay social security contributions. However, this would only be the case if the flat-rate tax was applied at the appropriate time, as the Federal Social Court (Bundessozialgericht, BSG) recently decided and thus overturned the decisions of the lower courts that were still deviating.
The case in question
In the case in question, to mark a company anniversary an employer had organised a business event in which the workforce also took part. The costs per participant exceeded the tax-free amount of €110. To begin with, the employer did not take these costs into account in the payroll tax return for the appropriate month, however, on 31 March of the subsequent year, the employer transmitted an amended payroll tax return. In this return, the employer declared the flat-rate taxation of 25% for the portion of the costs that had exceeded the tax-free amount, yet no social security contributions had been paid for this. Subsequently, the auditors from the Deutsche Rentenversicherung [German Federal Pension Scheme] objected to the non-payment of contributions and their view has now been endorsed by the BSG (ruling from 23.4.2024, case reference: B 12 BA 3/22 R).
Background to the ruling
Under the relevant Social Security Remuneration Ordinance (Sozialversicherungsentgeltverordnung), certain income that is taxed at a flat rate must not be allocated to remuneration that is subject to contributions. However, in April 2015, a sentence was added to this, according to which this would only apply if the flat-rate taxation of the income had taken place with the payroll accounting for the respective taxable period. In the opinion of the court, this requires the accounting as well as the flat-rate taxation to take place in parallel, which would also be consistent with the intention behind the amendment to the Ordinance. The fact that, for tax purposes, flat-rate taxation can take place at a later stage within the four-year limitation period for assessments is irrelevant for the calculation of social security contributions. For reasons of legal certainty and clarity, the specific concerns of social security would require that contributions cannot be dependent on uncertain future events.
Latest time
The accounting period is the one agreed between the parties when the remuneration has to be paid and accounted for, which is normally one month, at the end of which the accounting and thus the flat-rate taxation has to take place.
The BSG has however indicated that until the certificate of payroll tax deductions has been transmitted, it would still view the flat-rate taxation as having taken place with the accounting. Therefore, it would be possible for the taxation to take place before 28 February of the subsequent year in order to ensure that - as desired - contributions do not have to be paid. In the case in question, the amendment, which was only made on the 31 March of the subsequent year, was therefore late.
