Is a fine/ticket tax deductible?
January 14, 2011 | 30,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
According to the information I have received so far, fines or penalties are to be recorded as private withdrawals (as an entrepreneur).
But what if, for example, another company (Company B) covers the fines/penalties and issues an invoice for the service provided?
In short: Company A receives a fine. Company B pays the fine and issues an invoice for the service to Company A.
Now my questions:
1. Can Company B book the fine to be paid as an expense?
2. Can Company A fully deduct the invoice received from Company B as an expense for tax purposes?
3. Is such a service provided by Company B even possible, or could it be considered as tax evasion (or aiding in tax evasion)?
4. How does it work if the headquarters of Company B is located abroad?
I would be very grateful for a detailed response.
Sincerely,
Dear inquirer,
Thank you for your request, which I would like to answer as part of an initial consultation.
Company B cannot claim the fines as a tax-deductible business expense under § 4 (5) No. 8 EStG or § 10 (3) KStG. This applies regardless of whether the company itself is the recipient of the fine. In addition, questions arise regarding a hidden profit distribution if a corporation is involved.
If B passes on the invoice to A, this does not change the nature of the fine. After all, no service is being provided here, but B has made a payment for A, which is then simply passed on. Therefore, the prohibition on deducting fines remains unchanged.
The country in which Company B is based is irrelevant, as the deduction prohibition is based on the authority issuing the fine. Fines issued by authorities within the EU are not tax-deductible in Germany. Therefore, there is no tax deductibility for Company A. Whether Company B is able to deduct the fines or not depends on local tax law.
It is not possible to determine whether there are any criminal tax law violations in your case within the scope of this consultation.
I recommend that you do not implement the proposed model, as it will not result in any tax benefits for you.
Best regards,
Oliver Burchardt
Tax Advisor
