Definition and Introduction: Supervisory Board Tax
Die Supervisory Board Tax is a special income tax levied on the remuneration of members of the supervisory board of a domestic company. It primarily concerns the compensation paid to supervisory board members for their activities and represents a particularity of German income tax law. The relevant legal provisions can be found in the Income Tax Act (EStG) and the Corporate Income Tax Act (KStG). Below, the legal foundations, tax recording, assessment basis, taxation procedure, as well as relevant special features of the supervisory board tax are discussed in detail.
Legal Foundations of the Supervisory Board Tax
Income Tax Act (EStG)
The taxation of supervisory board remunerations is carried out according to § 19 para. 1 no. 4 EStG. According to this, the remuneration paid for activities as a member of a supervisory board is considered income from employment, provided that it does not constitute income from agriculture and forestry, business operations, or self-employment.
Corporate Income Tax Act (KStG)
In addition, § 34 KStG contains a specific provision in corporate income tax law regulating the collection of the supervisory board tax by certain corporations.
Income Tax Implementation Regulation (EStDV)
The EStDV regulates the detailed procedure for determining and withholding the supervisory board tax.
Personal and Material Scope of Application
Persons Concerned
The taxable persons are members of the supervisory board of a corporation, particularly large stock corporations (AG), partnerships limited by shares (KGaA), cooperatives, savings banks, and other institutions where laws or statutes provide for a supervisory body.
Type of Income
Remunerations, attendance fees, and all monetary benefits connected to supervisory board activities are subject to the supervisory board tax. It is irrelevant whether the payments are made as fixed remuneration, profit-related, or as variable components.
Distinction from Other Activities
A distinction must be made from other board remunerations, such as those for board members or advisory board members. Only typical supervisory board remunerations are subject to the supervisory board tax.
Tax Treatment and Assessment Basis
Income Determination
Die Remunerations for Supervisory Board Activities are taxable after deduction of any business expenses or allowances. This includes, in addition to direct payments, monetary benefits, expenses, and comparable benefits.
Wage Tax Withholding (§ 50a EStG)
Typically, the supervisory board tax is withheld at source directly by the company paying the supervisory board remuneration. According to § 50a EStG, a flat-rate income tax of currently 30 percent (plus solidarity surcharge and, if applicable, church tax) is withheld from the remunerations and remitted to the tax office.
Tax Withholding for Limited Taxpayers
For supervisory board members who are not subject to unlimited income tax in Germany, there is an obligation to withhold the supervisory board tax at source in accordance with § 50a para. 1 no. 4 EStG. This constitutes an independent tax collection fact.
Business Expenses
Supervisory board members may deduct business expenses in their tax assessment, provided these are related to the activity and exceed the statutory lump sums.
Procedure and Obligations of the Company
Withholding and Remittance of Tax
The paying company is obliged to remit the withheld supervisory board tax along with the wage tax declaration to the responsible local tax office. The same deadlines apply for declaration and remittance as for wage tax.
Issuance of Tax Certificates
Members of the supervisory board receive a tax certificate for the withheld tax amount, to be submitted with their personal tax return.
Legal Consequences and Crediting
Crediting within the Personal Income Tax Assessment
The supervisory board tax withheld from remunerations is credited within the personal income tax assessment of the supervisory board member (§ 36 para. 2 no. 2 EStG). Should the final income tax amount be lower than the withheld supervisory board tax, a claim for a refund arises.
Double Taxation Agreements (DTA)
If a member of the supervisory board is resident in another country, the respective double taxation agreements apply. As a rule, the withholding tax on the supervisory board remuneration can either be credited against the tax in the country of residence or the remuneration may be tax-exempt there.
Special Provisions and Exceptions
Remuneration Paid to Companies
If the remuneration is not paid to the board member directly, but to a company, for example, a consulting company, there are special provisions regarding tax attribution and the withholding of tax.
Special Provisions for Public Law Corporations
For members of supervisory boards of public law corporations, there are in some cases special rules, particularly regarding the tax exemption of certain compensations.
Tax Risks and Sanctions
Non-compliance with the statutory tax withholding obligations can lead to late payment surcharges, interest on back payments, and potentially tax-related criminal consequences.
Practical Guidance
Supervisory board members should ensure that their remunerations are properly, transparently, and in accordance with applicable tax regulations accounted for. The responsible company must carefully examine, especially in cross-border situations, multiple board memberships, or cases of unclear attribution, whether and to what extent tax deduction as supervisory board tax is required.
Literature and Web Links
For further information, numerous publications in the field of German tax law refer to the relevant commentaries on § 19 EStG, § 34 KStG, and § 50a EStG.
See also:
- Supervisory Board
- Income from Employment
- Withholding Tax
- Payroll Tax
- Double Taxation Agreements
This article provides a comprehensive overview and a detailed legal classification of the supervisory board tax in German tax law.
Frequently Asked Questions
How is the supervisory board tax levied legally and which laws are relevant?
The supervisory board tax, often referred to as the taxation of remuneration of supervisory board members, is determined in Germany by a multitude of legal regulations. The core statute is the Income Tax Act (EStG), especially § 19 paragraph 1 sentence 1 no. 3, whereby all remuneration for activities on the supervisory board counts as income from employment. Furthermore, the rate and nature of tax collection are also governed by wage tax guidelines, the Corporate Income Tax Act (KStG), and – in cases with international elements – by double taxation agreements. The company paying the supervisory board member is generally required to withhold wage tax and remit it to the tax office. In addition, country-specific administrative decrees or court decisions, such as those from the Federal Fiscal Court (BFH), may influence the specific interpretation and application of these legal requirements.
Is every supervisory board member subject to the supervisory board tax, regardless of residence or nationality?
Within Germany, generally all natural persons who receive income from supervisory board activities are subject to taxation by the supervisory board tax. The decisive factor is whether there is unlimited or limited tax liability pursuant to § 1 EStG. For supervisory board members resident abroad, the principle of limited tax liability pursuant to § 49 paragraph 1 no. 4 EStG applies, as the remuneration is usually considered domestic income. However, international cases may be modified by double taxation agreements (DTA). The specific allocation of the right of taxation under DTA generally follows Article 16 of the OECD Model Convention, with the right to tax usually belonging to the country of the company, not the country of residence. Nationality alone is not decisive.
What expenses can supervisory board members deduct for supervisory board tax purposes?
Supervisory board members can claim certain business expenses, provided these are directly related to their activities. Deductible expenses include, among others, travel expenses, accommodation costs, additional meal allowances, costs for professional literature, communication costs, as well as expenses for liability insurance in connection with supervisory board activities. However, the expenses must be demonstrable and reasonable; receipts must be retained. The standard expense allowance of 102 euros per year under § 9a sentence 1 no. 1 letter a EStG can alternatively be used without individual proof. A higher deduction is only possible if the actual costs can be credibly demonstrated. Non-deductible are expenses that are not work-related or are of a private nature.
Are companies required to withhold payroll tax for supervisory board members?
Yes, companies are, as remuneration debtors pursuant to § 38 paragraph 1 sentence 1 EStG, obliged to withhold the payroll tax on supervisory board remunerations and remit it to the tax office. This applies both for resident and non-resident members. Payroll tax is withheld according to general payroll tax tables, but often according to table VI. In addition, the solidarity surcharge and, if applicable, church tax must be withheld. The obligation to withhold payroll tax also arises if the supervisory board member itself files a tax return (e.g. income tax return). Companies must also issue a payroll tax certificate to the member, which must be used in the supervisory board member’s personal tax return.
How is VAT handled on supervisory board remunerations?
According to current law, remuneration of supervisory board members is generally not subject to VAT, provided the activity is mainly non-self-employed. The European Court of Justice (ECJ, judgment of 13.06.2019, C-420/18) clarified that self-employment only exists if the member bears its own entrepreneurial risk and can act independently. In Germany, the tax authorities (BMF letter of 08.07.2021) generally assume that membership of a supervisory board constitutes non-self-employed work and thus is not subject to VAT. In individual cases, however, if the engagement is truly self-employed, particularly due to specific contractual arrangements or freelance organization, VAT may arise – it all depends on the legal and actual circumstances. In such special cases, supervisory board members must apply for a VAT identification number and tax their services accordingly.
Are there any special features for supervisory board members working across borders?
In cases of cross-border activity, for example, when the supervisory board member is resident abroad or the company is based abroad, the regulations of international double taxation agreements regularly apply. These usually assign the right to tax supervisory board remuneration to the country’s seat of the company (see Art. 16 OECD Model Convention). This means that even if the supervisory board member lives abroad, the compensation may be taxable in Germany. However, it is possible to offset or exempt German tax in the country of residence. The company remains obliged to withhold tax even in cases involving foreign jurisdictions. Attention must also be paid to any reporting and documentation obligations for both the company and the member.
Can honorary supervisory board members claim tax allowances or reliefs?
If the remuneration for the supervisory board mandate is purely for honorary work, especially in associations, foundations, or nonprofit organizations, certain tax reliefs such as the so-called trainer allowance (§ 3 no. 26 EStG) or the volunteer allowance (§ 3 no. 26a EStG) may apply under specific conditions. A prerequisite is that the organization is tax-privileged and the work serves charitable, benevolent, or ecclesiastical purposes. However, these allowances do not apply if the mandate is in a for-profit corporation (e.g. an AG or GmbH). In any case, the precise requirements and possible documentation obligations should be observed, as the tax authorities regularly review this.
