Definition and Legal Foundations of Commissions
Commission is a term commonly used in business and commercial law that denotes a performance-based remuneration for brokering, concluding, or facilitating transactions. The entitlement to commission regularly arises from contractual agreements, often in connection with brokerage, commercial agency, intermediary, or similar contracts. The legal basis for commission claims is found in the German Civil Code (BGB) as well as the German Commercial Code (HGB). In other legal fields, specific commission regulations may apply, particularly in the insurance and real estate sectors.
Legal Definition and Delimitation of Commission
Distinction from Other Forms of Remuneration
Commission differs from other types of remuneration such as wages, salary, or fees in that it is directly linked to a specific success. Typically, the entitlement to commission only arises upon the conclusion or successful brokering of a transaction, not merely through the activity itself.
Types of Commission
There are different types of commissions, depending on the underlying contractual relationship and the respective area of activity:
- Brokerage commission: Remuneration for initiating or brokering a contract, for example in brokerage law or travel agency services.
- Completion commission: Remuneration for the actual conclusion of a contract, for example in securities transactions.
- Follow-up commission: Commission that may become due for the subsequent management of contracts, for instance in continuing obligations.
- Turnover commission: Percentage participation in the generated turnover, typically for commercial agents.
- Brokerage fee: A special form of commission applied in the real estate or insurance sectors.
Entitlement to Commission and Requirements
Formation of the Entitlement to Commission
The entitlement to commission generally arises from corresponding contractual agreements. The legal regulations, particularly in the HGB, determine the requirements, scope, and maturity of the commission entitlement. In detail, this depends on the type of contract:
Commercial Agent’s Commission (§§ 87 ff. HGB)
A commercial agent is entitled to commission under § 87 HGB if, through his activity, a transaction with a third party is concluded, provided it benefits the respective company. The activity’s contributory causality is decisive. Moreover, § 87a HGB provides for exceptions, restrictions, and commission claims for post-contractual transactions.
Broker’s Commission (§ 652 BGB)
Brokerage law regulates the brokerage commission in the context of evidencing or brokering contracts. The broker’s fee only arises if the contract is concluded as a result of the broker’s activity and no grounds for invalidity exist.
Insurance Sales Commission (§ 48 VAG)
Insurance law includes special provisions regarding the entitlement to and disclosure of commissions to ensure transparency for policyholders.
Due Date and Settlement of Commissions
The due date is determined by contractual agreement or by statutory provisions. According to § 87a HGB, the commission for concluded transactions is due at the end of the month, at the latest on the last day of the month following the contract’s conclusion. In other relationships, differing due dates may apply.
As a rule, the commission is to be understood as a net remuneration, on which value-added tax must be reported if applicable.
Scope, Calculation, and Enforcement of Commission
Calculation Principles
For the calculation of the commission, either fixed amounts or percentages of the brokered contract values are agreed upon. In case of a dispute, it must be examined whether all requirements are met, in particular, proof of causality and the amount of the transaction value.
Obligations for Settlement and Information
According to § 87c HGB, the company is obliged to provide the commission recipient with a statement and to grant access to and inspection of the necessary documents.
Recovery and Forfeiture
A commission entitlement may lapse or be retroactively withdrawn if the brokered transaction is not executed or is subsequently found to be invalid (§ 87a Sec. 2 HGB; § 654 BGB). In certain cases, the commission may be forfeited in whole or in part, e.g. in cases of breach of good faith.
Tax and Social Security Classification
Commission payments are generally subject to income tax and value-added tax, provided the recipient acts as an entrepreneur or self-employed person. In the area of social security, commission payments can influence the contribution assessment, depending on the status of the contracting parties (e.g., commercial agent or employee).
Transparency Obligations and Disclosure
Within the framework of statutory requirements (e.g. § 656a BGB for brokerage contracts), there are obligations to disclose the amount of commission to the contracting partner. Especially in the area of financial services and insurance, there are comprehensive disclosure obligations to avoid conflicts of interest and to maintain neutrality.
International Aspects and Cross-border Commission Agreements
International commission agreements may be subject to additional legal review, for example with regard to the applicable law or tax issues. The validity and enforceability of commission claims in cross-border situations are governed by international treaties, such as the CISG or relevant double taxation agreements.
Disputes and Judicial Enforcement
In the event of unresolved or disputed commission claims, there is the possibility to assert the claim in civil court. The burden of presentation and proof regarding the conclusion of the transaction, as well as the amount and due date of the commission, lies in principle with the claimant.
Summary
Commission is a central instrument of success-based remuneration in business. Its structure, calculation, and enforcement are determined by the applicable statutory and contractual provisions. Particular importance is attached to transparency in the agreement and settlement of commissions. Regulatory areas such as commercial, brokerage, insurance, and tax law have a significant influence on the legal framework. In the international context, additional regulations and agreements must be taken into account.
Frequently Asked Questions
Does a commission always have to be agreed in writing?
An express written form is not generally required for a commission claim, since under German law (§§ 305 ff. BGB) civil law contracts regarding commission payments – for example, between intermediaries and companies – are form-free and may therefore be concluded verbally or by conclusive conduct. However, in certain sectors, such as commercial agency law (§§ 84 ff. HGB), there are increased requirements: Here, a party can demand that the essential contract content, including the commission arrangement, be recorded in writing. For brokerage contracts, especially real estate transactions (§ 656a BGB), the law mandatorily prescribes the text form (e.g., e-mail or written contract). If this form is not observed, the commission claim is void. In addition, certain sectors, such as credit or insurance, require special documentation and information obligations regarding commissions to protect customers.
When is a commission legally due?
A commission claim legally arises whenever the contractually agreed condition is met, usually the successful conclusion of a primary contract that the entitled party is to broker or evidence. In commercial agency law, this is governed by § 87 HGB: The commission becomes due upon execution of the transaction by the company. In brokerage law (§ 652 BGB), the claim arises upon the conclusion of the demonstrated or brokered transaction. Actual maturity often depends on contractual agreement, but legally must be observed at the latest upon invoicing, unless otherwise stipulated. Security deposits, advance payments, or deferrals are possible but require explicit agreement.
Is there a statutory limit to the amount of a commission?
The law does not, in principle, prescribe a general upper limit for commission amounts; these are usually freely negotiable. However, there are sector-specific restrictions: In real estate law, especially for brokering residential space (§ 656c BGB), brokers may only charge a maximum of two net cold rents plus VAT as a commission from the apartment seeker. Sector-specific maximum commissions also exist in the insurance and credit industries to avoid conflicts of interest and ensure consumer protection. Furthermore, an immoral, excessively high commission may be void under § 138 BGB, particularly if the agreed remuneration is conspicuously disproportionate to the service rendered.
Can a commission claim become time-barred?
Yes, commission claims are subject to the regular civil law limitation period pursuant to § 195 BGB. The limitation period is generally three years and begins at the end of the year in which the claim arose and the creditor became aware of the facts giving rise to the claim or should have become aware of them without gross negligence (§ 199 BGB). In commercial business, for example for commercial agents’ commission, there are special exclusion periods (§ 87b(4) HGB), according to which commission claims must be asserted at the latest one year after they become due and the commercial agent has become aware of them. The individual periods can be modified contractually but may not be excluded to the detriment of protective provisions.
In which cases does the commission claim lapse despite successful brokering?
A commission claim lapses despite a successful brokering particularly if reasons for exclusion exist, such as the principal’s duty to cooperate not being fulfilled or the transaction ultimately being concluded on the initiative of a third party and the entitled party did not contribute (§ 652(2) BGB). The claim is also excluded if the transaction is legally void, for example due to immorality, violations of law, or missing permits (§§ 134, 138 BGB). For commercial agents, loss of commission is also possible if the transaction is not executed or withdrawn, unless the reasons for this relate solely to the company (§ 87a(1) HGB). In brokerage law, conflicts of interest and breaches of duty of loyalty, such as unauthorized contract conclusions to the detriment of the principal, also lead to exclusion of the claim.
Do commissions have to be taxed?
Yes, commissions count as taxable income. For income tax purposes, they are classified either as income from business operations (§ 15 EStG), from self-employed work (§ 18 EStG), or in special cases from employment (§ 19 EStG), depending on whether the beneficiary operates commercially, is a freelancer, or an employee. VAT is charged if the recipient acts as an entrepreneur and is entitled to deduct input tax; this does not apply to small businesses as defined by § 19 UStG. For tax purposes, invoicing obligations, proper bookkeeping, and declaration in the tax return are crucial. In cross-border transactions, particular attention must also be paid to VAT-related specifics.
What are the information obligations regarding commissions toward customers?
The duty to disclose commissions is strictly regulated, especially in consumer and financial services law. Brokers, insurance, and financial service providers must, upon request, inform the customer of the type and amount of commissions received (§ 60 VVG, § 5a VVG-InfoV). In real estate, § 656c BGB requires the specific recording of the commission in the contract. For securities services, there is a comprehensive obligation to disclose all payments (so-called ‘kick-backs’) under MiFID II and § 70 WpHG. These transparency requirements serve consumer protection and are intended to avoid conflicts of interest; failure to disclose may result in the commission entitlement being void or subject to recovery.
