Tax treatment of board directors – office staff, office space and cars

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The regional finance office of Magdeburg submitted an order on how to deal with additional benefits provided to members of the supervisory board for tax purposes.

Occasionally, larger companies provide office space, office staff and company cars to their board of directors in addition to their cash remuneration.  The question arose as to whether the value of these goods and services needed to be considered as remuneration of the board of directors in terms of § 18 section 1 number 3 German Income Tax Act (EStG).

The decree clarifies the question of taxation for the following situations:

• If office space and office staff are at the disposal of the member of the board of directors within the company building, it can usually be assumed that no taxable benefit arises as they are only used for the execution of the tasks of the board of directors.
• However, if office space and office staff are at the disposal of the member of the board of directors outside of the company building and particularly related to the apartment or the operating premises of the member of the board of directors (e.g. to the premises of his law firm), an additional taxable benefit arises to the extent the provision is not assigned to the legitimate costs of the board member as part of his or her tax assessment.
• If the member of the board of directors has a car at his disposal only on demand for journeys connected to his activity in the board of directors no taxable remuneration can generally be attributed as in this case the only purpose is the exertion of his function in the board of directors
• However, if the member of board of directors has a car at his constant and free disposal, an additional taxable benefit will arise.

These guidelines apply to the taxation of the remuneration of the board of directors for the member of the board of directors but the ultimate treatment depends upon the precise individual circumstances.

Reference(s):

OFD Magdeburg, degree dated 03.08.2011 –S 2248 – 15 St 213

For further information or to discuss any of the issues raised, please contact Joachim Menz on +49 89 242230-0.