(2022) What impact does my child's stay abroad have on the child allowance?

The child allowance and the BEA allowance (allowance for care, education or training needs) are both independent of your child's place of residence. However, you as a parent must be fully liable to income tax in Germany.

However, the place of residence of the child is decisive for the amount of the child allowance, as the allowance is reduced by one, two or three quarters depending on the country. To assess the local cost of living, the Federal Ministry of Finance issues a country group classification.

The country group classification is relevant whenever children are abroad and affects 

• the child allowance,
• the BEA allowance (for care, education and training),
• the amount of the training allowance,
• the calculation of childcare costs.

Short-term stays abroad, such as holidays, do not lead to a reduction. This also applies to temporary stays, such as for vocational training.

Note: You are also entitled to child benefit for children living in an EU or EEA country, unless benefits comparable to German child benefit are already being paid abroad. Double funding is to be excluded. The prerequisite is that the child is fundamentally to be taken into account, i.e. is of compulsory school age or, for example, is studying and has not yet reached the age of 25.

If the child is staying outside the EU or EEA for training purposes, another important condition applies: To receive child benefit, the place of residence or at least the usual place of residence must (continue to) be in Germany. In simple terms: if a child lives permanently in a third country outside the EU and EEA, such as the USA, there is no entitlement to child benefit in Germany. Child benefit is only paid if the child stays in Germany at least temporarily and actually maintains their residence in Germany.

The Federal Fiscal Court has recently ruled as follows: If a minor child who initially lived in Germany stays outside the EU and EEA for more than a year for training purposes, they retain their residence in Germany in the home of one or both parents only if,

o    they have rooms suitable for permanent living in this home,

o    they can objectively use them at any time, and

o    actually use them with a certain regularity.

In general, the residence in Germany is only maintained if the child actually uses this home for at least the majority of the training-free periods, i.e. school or semester holidays (BFH ruling of 28.4.2022, III R 12/20). In the case in question, a child lived for more than a year in a third country with their grandparents to learn the Arabic language at school. The BFH did not make a final decision but referred the case back to the lower court. This court must now make findings on the existence of a residence in Germany, as the investigation of the facts was incomplete.

 

For the retention of a residence in Germany at the parents' home during multi-year stays abroad, only short visits, usually based on the parent-child relationship, are regularly not sufficient. Lack of financial means for the child's home visits cannot compensate for the lack of significant stays in Germany during training-free periods (BFH ruling of 25.9.2014, III R 10/14). The BFH judges do point out that all circumstances of the individual case must be considered when determining whether the residence in Germany has been maintained. However, in the end, it will be important whether the child travelled home during the holidays and spent the holidays mostly with the parents. Parents should definitely take precautions with their child to provide evidence, such as keeping train and flight tickets, making copies of the passport, presenting study plans, etc.

 

The residence at the parents' home is only given up after the first year of study if a study abroad, initially planned for only one year, is extended (Lower Saxony Fiscal Court, ruling of 7.1.2020, 5 K 168/17). This ruling is not yet legally binding. The BFH must clarify whether hospital stays in Germany count when determining whether a child studying abroad has maintained their residence in Germany (case no. at the BFH: III R 11/21).

 

For the sake of good order, it should be noted that there are special features regarding child benefit in connection with countries with which a social security agreement exists (e.g. Turkey).