Is a 'John' liable for prostitution tax?
November 27, 2011 | 25,00 EUR | answered by Oliver Burchardt
I met a prostitute from Romania in a nudist club, where a daily fee of EUR 25 is charged. Since business was rather slow in this club, the lady offered to visit me privately, along with a friend who also does the same. I have been engaging in this regularly since May 2011 until recently. I have paid her approximately EUR 2000 per month (at a daily rate of EUR 250).
Now that my wife has found out about the affair, she has put pressure on me, as she believes that this constitutes undeclared work and demands that I report it to the customs or tax authorities. She may also be thinking that this way I will no longer book this woman. Since my wife has threatened me with sanctions, I am considering whether I should comply with her demands. She is a taxpayer herself with a deduction of around 50%, so she is particularly upset that the girl gets to keep the money net.
However, I fear consequences for myself, as I could be held liable as a possible 'employer' for these contributions, so reporting it could harm me more than the lady, especially since she is traveling to her family in December and may not return.
Dear questioner,
Thank you for your inquiry, which I would like to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Changing, adding, or omitting information may significantly affect the tax result.
As a freelancer, you are usually not the employer of the prostitute. In exceptional cases, this may happen, but according to a judgment of the FG Munich dated December 14, 2007, file no. 8 K 849/05, clear indications must speak for it. An essential feature is the exclusive activity for a customer (in the case of the judgment, a corresponding club was the employer, but the principles can be applied). This is unlikely to be the case for you.
From a tax perspective, prostitution constitutes a commercial business. The prostitute is therefore responsible for properly declaring the income earned for income tax, trade tax, and VAT purposes. You, as the client, are not liable for this, unless you know positively or should know that the activity is being conducted "off the books." However, it is unlikely that you would be able to recognize this for a prostitute, as you would not receive an invoice for the service.
From a purely tax perspective, making a report would therefore have no consequences for you.
In Germany, there is generally no obligation to report crimes when they are known. The exception of § 138 StGB does not apply to tax evasion. Furthermore, you do not even know if the lady fulfills the criminal offense of tax evasion. You should definitely consult a lawyer regarding the submission of a report and clarify what legal consequences a falsely filed criminal complaint could have, as § 164 StGB generally punishes this. Due to professional reasons, I am unable to provide advice on this matter.
I hope I have been able to assist you with your inquiry.
Sincerely,
Oliver Burchardt
Auditor
Tax advisor
