Financial and tax advisors are not insured for legal advice and are liable for damages and for reversal.
Long-term accounts / working time accounts for shareholder-managing directors Tax and financial advisors are always pleased when they can do something good for their clients.
“Mr. Managing Director, save wage tax today – and retire earlier in return” – this is the simple formula for collecting funds through a “salary sacrifice”, investing them first, sometimes with high risks, fat commissions – sometimes this brokerage fee is shared by the various consultants.
No insolvency protection Financial and tax advisors are not insured for legal advice.
Your bad luck if the advice was then wrong, because the blind parroting of advertising brochures, according to which insolvency protection can be achieved by pledging, is not infrequently incorrect. The pledge can be considered an “ineffectual attempt”, as numerous judgments and petitions to the German Bundestag show: In the end, it is a holey sham security.
Tax saving model or tax fraud?
For many years expert and commission-independently working respectable tax advisors know that the fiscal acknowledgment of life work time accounts or time value accounts with the managing partner is everything else than safe. Because of this, most tax offices have also refused for years to share the only conceivable security by simply refusing to provide binding information in individual cases. Or one has once received a positive answer in an individual case and transferred this – but thus completely without obligation – to new clients.
Tax trap for the middle class:
Tax liability of the advisors With it tax and financial advisors lured for years shareholder managing directors (GGF) concerned into the tax trap: The tax auditors will not accept this tax shifting. The payments to build up a “value credit” are then taxable as normal wages. On the GmbHs and AGs concerned juicy additional payments come to – plus if necessary evasion interest i.H.of 0.5 per cent or one per cent monthly. Of course, financial and tax advisors can also be liable here for instigation or aiding and abetting: Their own pecuniary loss insurance will not usually provide compensation for such errors – after all, this is a generally known tax risk.
Malpractice by financial fraudsters
The Federal Minister of Finance has recognised that a GGF has de facto power of disposal over the accumulated “value credit” at any time, which is why it is not reserved for early retirement: Rather, it is considered to be received wages – thus there is a full wage tax liability. This can also be seen in a similar way in the case of normal managing directors and board members with fixed-term contracts, because they can have the credit balances paid off at the end of the employment contract – a typical case of abuse of the arrangement. After all, whether contract extensions will ever be made into the “early retirement” period is completely up in the air. If capital investments were used without a guarantee of preservation of value, the tax auditor will also attack the design of normal managing directors/board members and therefore often refuse tax recognition.
The main target group for distributors is falling away Particularly for shareholder-managing directors, the working time account models were advertised as being particularly interesting from a tax point of view: For distributors, this was often the main target group, which had already been courted for decades in occupational pension provision. Combined with commission-generating products, this was a lucrative business. However, the assumed tax basis for this is now also collapsing.
Finance minister blocks way out of final withholding tax
It is no coincidence that it is precisely now that the ways out of the flat rate withholding tax and the other tax saving models developed in recent years are gradually being dried up. This is because the final withholding tax will be introduced from 2009, specifically to curb the de facto tax injustice criticised by the Constitutional Court. However, the final withholding tax is only one basis of tax fairness – the other is to curb evasion. And the state is not only concerned with justice, but of course also welcomes the additional revenue generated from this, for which one is happy to expend a little more effort, as long as it only pays off on balance.
by courtesy of
www.campingimpulse.de (published in CampingImpulse, issue 04.2008, page 33)
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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