The employer may regularly reimburse the relocation expenses incurred by an employee in the event of a job-related change of residence free of wage tax and social security contributions.
With regard to the VAT treatment of relocation costs borne by the employer, the Federal Fiscal Court had ruled that corresponding reimbursements (in the case of the dispute for brokerage costs) do not constitute taxable employee benefits and are therefore not subject to VAT.
VAT assessment of employer relocation expenses: Federal Ministry of Finance.
Now the tax authorities have confirmed this view and apply it in all open cases. Accordingly, the assumption of corresponding costs does not constitute benefits that are to be regarded as consideration for subsequent work performance. The employer’s reimbursements, on the other hand, are generally due to the requirements of the company’s economic activity and are therefore in the employer’s overriding interest.
Since there is therefore no performance by the employer for non-business purposes, an input tax deduction can also be claimed from the relocation costs. The prerequisite for this is, in particular, the existence of invoices made out to the employer (and not to the employee).