Until 2006, commuting costs between home and workplace were deductible as income-related expenses under § 9 EStG or as business expenses under § 4 EStG for income subject to income tax. This was generally facilitated through a flat rate per working day, independent of actual costs incurred, which was most recently €0.30 per kilometer of distance (distance allowance, also known as the commuter allowance). Effective from 2007, the legislator stipulated in § 9 para. 2 sentences 1 and 2 EStG (and correspondingly in § 4 para. 5a EStG) that expenses for travel to the regular workplace are not income-related expenses (sentence 1). However, 'to compensate for increased expenses,' a flat rate of €0.30 'as income-related expenses' is to be applied for journeys from the 21st kilometer of distance (sentence 2). The fundamental introduction of the 'factory gate principle' under sentence 1 was justified during the legislative process by the necessity of consolidating the excessively indebted state budget (with expected annual additional revenues of approximately €2.53 billion), while the continued deductibility of increased expenses for longer distances was maintained as a supplementary hardship provision.
In response to submissions from the Fiscal Courts of Lower Saxony and Saarland, as well as the Federal Fiscal Court, the Second Senate of the Federal Constitutional Court ruled that these new regulations are incompatible with the requirements of the general principle of equality under Art. 3 para. 1 GG for a consistent structuring of income tax burden decisions, due to a lack of constitutionally sound justification, and are therefore unconstitutional.
The legislator is consequently obliged to retroactively eliminate the unconstitutionality by reforming the legal situation, effective January 1, 2007.
Until new legislation is enacted, the flat rate under § 9 para. 2 sentence 2 EStG is to be applied – provisionally – without the restriction to distances only from the 21st kilometer.
This means that all commuters can retroactively claim €0.30 per kilometer of distance between their home and workplace for the years 2007 and 2008, starting from the first kilometer, effective January 1, 2007.
Source: Press release of the Federal Constitutional Court (BVerfG) No. 103/2008 of December 9, 2008
For further information, please refer to the full judgment text at: http://www.bundesverfassungsgericht.de/entscheidungen/ls20081209_2bvl000107.html
© Goldberg Attorneys at Law, Wuppertal-Solingen 2008
Attorney at Law Michael Ullrich, LL.M.(Information Law)
m.ullrich@goldberg.de
