Germany: For managers who do not pay themselves, a full salary, the tax office assumes a fictitious inflow and imposes tax.
Previously, any part of the salary of a shareholder-managing director thatwas unpaid was taxed only as long as the claim was booked de facto as a debt against the company. Now, under new rules issued by the Federal Ministry of Finance for taxing shareholder-managing directors, claimscan be taxed as soon as they are due. This is a significant change in the law, as until now an actual accounting transaction was required. Under the new rules an actual accounting transaction is no longer necessary. Whether profit decreasing effects in the balance sheet take place or not is not a factor triggering application of the so called “inflow fiction”. The only thing that matters is that there is a claim. For inflow to a shareholder-managing directorbased on a hidden deposit it is crucial whether the shareholder-managing directorwaived their claim before or after the claim came into existence. It is relevant to what extent liability had to be recorded in the balance sheet at the moment of the waiver. It is not relevant for inflow if the accounting was real. Although the new rules are only stated for the unpaid salary of a controlling shareholder-managing director, the assumption is that tax offices will also apply these new rules to all deferred payments that a shareholder-managing director has a call for and so will claim taxes on wages. It should also be assumed that these rules will not only come into action against the controlling shareholder-managing director but also against a non-controlling shareholder-managing director. By contrast the new rules will not come into action against a managing director who is not a shareholder or a managing director who just has a tiny share. These managing directors are taxed as employees so that taxes on wages are due if there is a definable payment. Taxing a fictitious salary is forbidden.To avoid unnecessary disputes with tax offices it is advisable to satisfy the new rules, which tax offices are under pressure to enforce.