Avoid retroactive payments

Retroactive payments are not possible, i.e. an amount transferred in August can only be intended for maintenance in August or the following months. If the support payments do not cover the entire calendar year but only individual months, the maximum amount for support payments will be reduced accordingly.

(2023): Avoid retroactive payments

Maintenance payments to relatives abroad: Strict proof requirements apply!

Many foreign nationals living and working in Germany support their relatives abroad. Individuals with a foreign spouse may also provide financial support to their spouse's relatives. Since 2007, the tax office has imposed stricter requirements for proving maintenance payments and the recipient's neediness.

Recently, the Federal Fiscal Court rejected maintenance payments to parents living in Indonesia because neediness was not sufficiently proven. Certificates of need for adult maintenance recipients must include detailed information about income received before the start of support.

Given the limited ability to verify circumstances abroad, comprehensive information is essential. It is generally reasonable to provide fully completed certificates (BFH ruling of 7.5.2015, VI R 32/14).

The case: The son living in Germany supported his parents in Indonesia with 5.000 Euro. He presented the tax office with two documents from the municipal administration (Indonesia) stating that his parents do not receive a state pension as civil servants or public employees. Subsequently, he provided another certificate stating that the father is not employed, has no income, and does not receive a pension. However, the BFH did not consider this sufficient proof of the parents' neediness.

The BFH is very strict here: The judges criticised that the submitted "maintenance certificates" from the municipal administration (Indonesia) were incomplete in essential parts. In particular, there was no information about income received by the parents before the start of support, and thus no information on how they supported themselves before the son's payments began.

Furthermore, the submitted certificates from the municipal administration were incomplete as they did not provide information on the parents' financial situation, such as (self-used) property. These certificates only excluded personal income and pension receipt (as civil servants or public employees) but said nothing about other income, e.g., from rental. Therefore, the information in the certificates could not be used to conclude their neediness.

However, the BFH allows for some relief: The fulfilment of obligations to clarify the facts and to provide and procure evidence must be possible, reasonable, and proportionate. For example, in cases of civil war, evidence relief regarding the procurement of official certificates may be considered.

The Federal Ministry of Finance has recently issued two comprehensive decrees on the deduction of maintenance payments, including the question of proof of maintenance payments. There are several points to consider, especially for payments to relatives living abroad (BMF letter of 6.4.2022, IV C 8-S 2285/19/10002 :001 and 10003 :001). Among other things, the following applies:

Transfers to relatives abroad must generally be proven by postal or bank documents (booking confirmations or account statements) showing the supported person as the recipient. If several people living in a shared household are supported, it is sufficient if the transfer documents are in the name of one of these people. For transfers to an account abroad not in the name of the supported person, a bank certificate of account authorisation and the time, amount, and recipient of the payment is required in addition to domestic payment documents.

The taxpayer may also choose another payment method if the maintenance payment is proven in sufficient form. For cash maintenance payments and all other payment methods, increased evidence requirements must be met. Withdrawal receipts and detailed recipient confirmations are required. There must be a sufficient factual connection (period of no more than two weeks) between the withdrawal and the respective cash handover. The trip must always be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

Relief applies to family visits by the taxpayer to his family living abroad. A family visit only occurs if the taxpayer visits his spouse living abroad, who continues to maintain the family household there. If the spouse also lives in Germany and the taxpayer only visits his children or parents living abroad, it is not a family visit, and increased evidence requirements apply again.

For employees, it can generally be assumed that the taxpayer takes a net monthly salary for the maintenance of the spouse, children, and other relatives living in the spouse's household on each family visit. This evidence relief applies only to up to four family visits per calendar year. However, within the framework of the evidence relief, a maximum amount can be claimed, which results when the fourfold net monthly salary is reduced by payments made and proven or credibly demonstrated in other ways. If the taxpayer claims higher expenses than (flat rate) the fourfold net monthly salary, all payments must be proven according to the general principles.

Money transfers through an intermediary (this also includes a neutral commercial transport company) can generally not be recognised. This does not apply if, due to the special situation in the country of residence (e.g., crisis area), no other payment method is possible. In this case, the identity of the intermediary (name and address), the exact travel route, and complete proof of the origin of the money in Germany and every single step until the handover to the supported person must be provided. The trip by a private intermediary must always be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

A recipient confirmation must be issued for the handover of each individual amount of money. It must include the name and address of the taxpayer and the supported person, the date of issue and the recipient's signature, as well as the place and time of the money handover. To fulfil its intended evidential function, it must be issued in exchange for the money. Subsequently issued or combined recipient confirmations do not meet the proof requirements.

(2023): Maintenance payments to relatives abroad: Strict proof requirements apply!

Maintenance payments: Cash payments for relatives abroad deductible

Many foreign nationals in Germany financially support their family members in their home country. The tax office imposes strict requirements on the proof of these maintenance payments and the recipients' need. Cash transfers via intermediaries, including neutral transport companies, are generally not recognised for tax reduction purposes (BMF letter dated 7.6.2010).

An exception applies only if there are special circumstances in the country of residence, such as a crisis situation, and no other payment method is possible. In such cases, the identity of the intermediary, the exact travel itinerary, and complete proof of the origin of the money in Germany and its handover to the recipient must be documented. This includes evidence such as tickets, fuel receipts, border crossing stamps, flight tickets, and visas.

A court ruling from Baden-Württemberg in 2016 decided that maintenance payments to close relatives in Italy are tax-deductible under certain conditions. One case describes how a guest worker transferred maintenance payments to his parents in Italy, with cash amounts personally delivered by an acquaintance who regularly travelled to southern Italy.

The tax judges accepted the maintenance expenses after hearing the money courier as a witness, as the details of the trips and money transfers were credible and consistent. (FG Baden-Württemberg dated 21.7.2015, 8 K 3609/13, published on 2.3.2016).

The Federal Ministry of Finance has currently clarified in comprehensive decrees how maintenance payments can be deducted for tax purposes, especially for payments to family members living abroad (BMF letter dated 6.4.2022, IV C 8-S 2285/19/10002 :001 and 10003 :001). Here are the key points:

• Transfers to relatives living abroad must generally be proven by postal or bank receipts identifying the recipient. If several people in the same household are supported, it is sufficient if the receipts are issued to one of the household members.
• Payments to foreign accounts not in the recipient's name require, in addition to the German proof, a bank certificate of account authorisation and payment details.
• Alternatively, other payment methods can be used if they are sufficiently proven. For cash payments and other methods, there are increased proof requirements. This includes withdrawal receipts, detailed recipient confirmations, and a clear temporal connection between withdrawal and handover, which must not exceed two weeks. The journey must be proven by tickets, fuel receipts, border controls, flight tickets, or visas.
• Under certain conditions, family visits by the taxpayer ("family journeys home") to their supported family abroad are tax-deductible. However, the agreements do not apply if the taxpayer's spouse lives in Germany and the taxpayer only visits their children or parents abroad.
• Employees can usually claim a net monthly wage per family journey home for the maintenance of the spouse, children, and other relatives living in the household. This regulation applies to up to four trips per calendar year.
• Money transfer through intermediaries such as neutral transport companies are generally not recognised for tax reduction purposes. An exception applies only if there are special circumstances in the country of residence, such as a crisis, and no other payment method is possible. In such cases, the identity of the intermediary, the travel itinerary, and complete proof of the money's origin and handover must be documented. The journey must be proven by appropriate evidence such as tickets, fuel receipts, border controls, flight tickets, or visas.
• For each money transfer, a recipient confirmation must be issued, containing the names, addresses, date and signature of the recipient, as well as the place and time of the money transfer. The confirmation must be issued immediately upon handover to maintain its evidential value. Confirmations issued later or summarised do not meet the proof requirements.

Maintenance payments are deductible as extraordinary expenses up to the maximum amount of 10,908 Euro (2023) without crediting a reasonable burden. However, own income and receipts above 624 Euro per year are credited.

The maintenance maximum amount and credit exemption are reduced according to the country group classification by one, two, or three quarters if the maintenance recipient lives in a country with a lower standard of living.

Attention: Maintenance payments can only be considered for tax purposes until the end of the year, and the maximum amount for payments made during the year must be proportionally allocated to the year (BFH ruling dated 25.4.2018, VI R 35/16).

(2023): Maintenance payments: Cash payments for relatives abroad deductible

How can I claim maintenance payments to a person in need?

If you pay maintenance to a relative, you can claim this as extraordinary expenses for tax purposes, without any deductible being applied. However, the tax office will only consider the support if it is in a reasonable proportion to your net income. After deducting the maintenance payments from your net income, it must still be sufficient to cover your living expenses and those of your partner and children. This is the sacrifice limit, the limit up to which the tax office recognises your maintenance payments. The sacrifice limit does not apply to maintenance payments to your ex-spouse or permanently separated spouse. The same applies if you make maintenance payments to your destitute partner with whom you live in a shared household.

How is the sacrifice limit calculated?
The basis for calculating the sacrifice limit is your net income, i.e., all income (taxable and tax-free). This includes, for example, your salary, child benefit, but also unemployment benefit. Deductions include income tax, church tax, social security contributions, the solidarity surcharge, and the employee allowance or work-related expenses. The sacrifice limit is then one percent for every full 500 Euro of net income. For spouses, the joint income is used for the calculation. However, a maximum of 50 percent of your net income is recognised as the sacrifice limit. The percentage is reduced by five percentage points for each of your children for whom you receive child benefit and also by five percentage points for your spouse, but by no more than 25 percent in total.

Example: You are married, have two children, and support your parents with 9.000 Euro per year. Your annual net income is 24.000 Euro.

Net income: 24.000 Euro

• 1 percent for every full 500 Euro: 48 percent
• Less spouse: -5 percent
• Less 2 children: -10 percent
• Remaining: 33 percent

Your sacrifice limit is therefore 33 percent of 24.000 Euro, i.e., 7.920 Euro. Of your maintenance payments of 9.000 Euro, only 7.920 Euro are recognised. The maximum maintenance amount of 10.908 Euro (2023) also applies here, plus any contributions to health and nursing care insurance if you have paid such contributions for the maintenance recipient.

(2023): How can I claim maintenance payments to a person in need?

Can I also declare one-off payments?

Occasional or one-off maintenance payments are also tax deductible as part of maintenance payments to dependants.

For a one-off maintenance payment, the tax office always assumes that it is intended to cover maintenance needs until the end of the year. The maximum maintenance amount is then reduced by one twelfth for each preceding month. If you make a payment in September, the maximum maintenance amount is reduced by 8/12. However, if you make the one-off payment in January, the maximum maintenance amount is not reduced. A maintenance payment in January thus secures the full maximum maintenance amount for the whole year, provided the supported person is in need for the entire year. The maintenance payment should always cover living expenses until the next payment. It does not matter whether these payments reach the pro rata maximum amount.

Maintenance payments to a spouse can always be deducted up to the maximum maintenance amount, regardless of when the payment is made.

(2023): Can I also declare one-off payments?

Maintenance payments to relatives abroad: Stricter proof required for cash payments

Many foreign nationals living and working in Germany support relatives abroad. Additionally, individuals with a foreign spouse may provide financial support to their spouse's relatives. Since 2007, the tax office has imposed stricter requirements on proving the recipient's need and the payments made for maintenance payments to relatives abroad. Particularly stringent proof requirements apply to cash payments.

The Federal Fiscal Court rejected maintenance payments to the mother living in Hungary because the cash payments were not sufficiently proven. In the case of maintenance payments to recipients living abroad, the parties involved are particularly obliged to cooperate in clarifying the facts and obtaining evidence. The evidence required to prove a fact depends on the circumstances of the individual case (BFH ruling of 9.3.2017, VI R 33/16).

• Proof of a cash payment requires a reliable recipient confirmation and a timely, complete proof of the "payment chain", i.e., evidence of withdrawals or the specific availability of these amounts at the time of payment by the maintenance payer. Merely having the appropriate income and asset situation is not sufficient.
• Furthermore, the maintenance payer must provide detailed evidence of the "how and when" of the cash payment. Therefore, convincing proof is hindered if the payer cannot prove that they were at the payment location for the claimed cash payment. Although the maintenance payer does not have to personally hand over the cash, they must name the intermediary, i.e., the person who delivered the money.
• In the court case, there was no proof that the stated payments were actually made. The submitted receipts were insufficient. They did not indicate whether the recipient received the payments as a lump sum or in instalments. The confirmations stated a total payment of 1.800 Euro. Additionally, the confirmations did not specify when the payment(s) were made. The documents were dated, but the date only referred to the day of issue, not the time of the cash payment.

However, the BFH grants a relief: "The fulfilment of the obligations to clarify the facts and to provide for and obtain evidence must be necessary, possible, reasonable, and proportionate." For example, in the case of a civil war, evidential relief regarding the procurement of official certificates may be considered.

The Federal Ministry of Finance has recently issued two comprehensive decrees on the deduction of maintenance payments, including the question of proof of maintenance payments. There are several points to consider, especially for payments to relatives living abroad (BMF letter of 6.4.2022, IV C 8-S 2285/19/10002 :001 and 10003 :001). Among other things, the following applies:

Transfers to relatives abroad must generally be proven by postal or bank documents (booking confirmations or account statements) showing the supported person as the recipient. If several people living in a shared household are supported, it is sufficient if the transfer documents are in the name of one of these people. For transfers to an account abroad not in the name of the supported person, a bank certificate regarding the account authorisation and the time, amount, and recipient of the payment is required in addition to the domestic payment documents.

The taxpayer may also choose another payment method if the maintenance payment made in this way is sufficiently proven. For cash maintenance payments and all other payment methods, increased evidence requirements must be met. Withdrawal proofs and detailed recipient confirmations are required. There must be a sufficient factual connection (period of no more than two weeks) between the withdrawal and the respective cash payment. The trip must always be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

Relief applies for family visits by the taxpayer to their supported family living abroad. A family visit only occurs if the taxpayer visits their spouse living abroad, who continues to maintain the family household there. If the spouse also lives in Germany and the taxpayer only visits their children or parents living abroad, it is not considered a family visit, and increased evidence requirements apply again.

For employees, it can generally be assumed that the taxpayer takes a net monthly salary for the maintenance of the spouse, children, and other relatives living in the spouse's household on each family visit. This evidential relief applies only to up to four family visits per calendar year that are proven. As part of the evidential relief, however, a maximum amount can be claimed, which results from the fourfold net monthly salary minus payments made and proven or credibly demonstrated in other ways. If the taxpayer claims higher expenses than (flat rate) the fourfold net monthly salary, all payments must be proven according to the general principles.

Money transfers through an intermediary (this also includes a neutral commercial transport company) can generally not be recognised. This does not apply if, due to the special situation in the country of residence (e.g., crisis area), no other payment method is possible. In this case, in addition to the identity of the intermediary (name and address), the exact travel route must be presented, and a complete proof of the origin of the money in Germany and every single step until the handover to the supported person must be provided. The trip by a private intermediary must always be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.

A recipient confirmation must be issued for each individual cash payment. It must include the name and address of the taxpayer and the supported person, the date of issue and the recipient's signature, as well as the place and time of the cash payment. To fulfil its intended evidential function, it must be issued in exchange for the cash payment. Subsequently issued or combined recipient confirmations do not meet the proof requirements.

(2023): Maintenance payments to relatives abroad: Stricter proof required for cash payments