Tax arrangements with cell phones
EDP and telecommunications equipment
The private use of company IT or telecommunications equipment, in particular cell phones and accessories, by employees is exempt from income tax (Section 3 No. 45 of the German Income Tax Act/EStG).
Design tip
A publishing company developed the following tax-saving model from this regulation: The company bought its employees' used cell phones at a symbolic price, then made these cell phones available to its employees again and assumed the monthly costs of the cell phone contract, such as basic fees, connection charges or even flat fees. For this purpose, the publisher agreed separate cell phone transfer contracts with the employees. The tax office treated the employer's reimbursements for the employees' cell phone contracts as taxable wages. In the opinion of the tax authorities, the sale of the employees' used cell phones to the employer constitutes an inappropriate legal arrangement that would lead to a tax advantage not provided for by law.
BFH ruling
The German Federal Fiscal Court/BFH took a different view and thus also opposed the view of the tax authorities (see Wage Tax Notes 2023 on Section 3 No. 45 EStG). The purchase agreement for the cell phones is to be recognized for tax purposes. The tax recognition is also not to be denied on the basis of arm's length principles. The judges also did not see any abuse of legal structuring options (BFH ruling of November 23, 2022, VI R 50/20).
Conclusion
The purchase of cell phones by the employer turned private cell phones into company cell phones. As a result, these could be provided to the employees tax-free in accordance with the above exemption provision and, in addition, the costs incurred by the employees for the mobile phone contracts for the devices in question could be reimbursed tax-free. The SIM card belonging to the respective mobile phone contract of the employee was used in the cell phones purchased by the employer.
Status: April 26, 2023
Image: David - stock.adobe.com
