Payment for licence plate advertising is remuneration

The remuneration paid by the employer for advertising on the licence plate holder of the employee’s private car is remuneration for work if the underlying “advertising rental agreement” has no independent economic content. This was decided by the Federal Fiscal Court. For the assessment of the “advertising fee” of 255 euros per year, it was evident that not the achievable advertising effect was decisive, but only the tax exemption limit according to section 22 no. 3 EStG.
“Advertising fee”: Tax-free other income or wage payment?

In the case at issue, the employer had concluded “advertising rental agreements” with some of its employees. According to these contracts, the employees undertook to attach licence plate holders bearing the employer’s advertising to their private cars. In return, they each received 255 euros per year. The employer treated the “advertising fee” as other income according to section 22 no. 3 EStG and therefore did not withhold wage tax. This was also advantageous for the employees, as such income below an amount of 256 euros is tax-free. In contrast, the tax office assumed a wage payment and held the employer liable for the wage tax not withheld and paid.
“Advertising rental agreements” have no economic substance of their own

The BFH confirmed the opinion of the tax office, as did the Münster Regional Tax Court. It is true that not every payment made by an employer to his employees constitutes wages. Rather, an employer could conclude other independent contracts with his employee in addition to the employment contract. However, if a separately concluded contract did not have an independent economic content, it could be a further payment of wages. The “advertising rental contracts” in dispute, which were linked to the term of the employment contracts, did not have an independent economic content. For the assessment of the “advertising fee” of 255 euros per year, it was evident that the achievable advertising effect was not decisive – as is usual in commercial transactions – but only the tax exemption limit according to section 22 no. 3 EStG.