Time value accounts (ZWK) for managing partners

Why it is mostly evasion of taxes and social security? –


The prelude is the questions of the examination service of the German Pension Insurance Association (DRV) on the insolvency protection of time value accounts of managing directors. The main act follows along the lines of the Greek tragedy by the income tax inspector of the tax office, in line with the case law of the Federal Fiscal Court (BFH). And the penultimate act is a fine notice or charge from the prosecutor’s office. Only then does the final act follow, the action for recourse with the credit institution, insurance broker or insurer – because of faulty and forbidden legal advice.


Full social security liability – no matter how high the commissions are

A company health insurance fund (BKK) already wrote under 15.12.2005: “According to the unanimous opinion of the central associations of the statutory health insurance funds, the debiting of a credit balance with so-called agent commissions exclusively in the first insurance years, as is usual with zillmerised tariffs, has no effect on the amount of the (possibly virtual) credit balance to be carried.

I.e. the debits of the credit balance are fictitiously distributed over the entire term, in the event of an incident there is therefore an obligation to pay the full amount of SI.”.


In other words: The money for the at any time possible necessity of a payment of social security (also prematurely, in the so-called incident) has to be completely available – even if it was already partially burned by the sales of banks and insurance companies through commissions. In fact, this is hardly ever the case in practice – trouble with the tax auditor is inevitable. The manager can then gauge what he had really paid.


Often full tort liability of banks and insurance companies as well as brokers

Already in 2009, the professional association “BRBZ” stated that the provision of advice in the field of working time accounts by credit institutions and insurers is illegal. As a result, they are liable for errors even without proof of fault. However, this hardly bothers the sales force – they have long since priced it into their own fees and commissions on average.


Liability ruling of the Federal Fiscal Court (BFH) denies managing directors the ZWK

By press release dated 11 November 2015, the BFH stated that there can be no time value account in the case of shareholder-managing directors, because “It is not compatible with the job description of a GmbH managing director that he forgoes his direct remuneration in favour of free time to be remunerated at a later date by keeping a working time account, as the Federal Fiscal Court (BFH) ruled in its judgment of 11 November 2015 I R 26/15.”


In other words, every credit institution, insurance broker, insurer or other provider has put the CEO on the spot. Their time value accounts are worthless. These constructs are valuable for the tax auditor, because double taxes are now incurred due to “hidden profit distribution” – on the one hand, the costs cannot be deducted from the profit as operating expenses. On the other hand, the “hidden distributions” are nevertheless taxable (as wages) even without a cash flow. Thus, in a nutshell, all the money for this model turns into tax burdens – there is hardly anything left over, due to double tax burdens.


Time value accounts in the firing line

Self-proclaimed experts thought everything was hunky-dory. But after the audit by the tax office – or vice versa: After the audit by the audit service of the DRV, the awakening follows: first with a hearing by the DRV according to § 28p I SGB IV. The audit service wants to know how the time value account is protected against insolvency in the full amount and in favour of the right person? In particular, why the payment obligation required by the trustee in favour of the employees and the social security collection agency had not been coordinated with these beneficiaries. After all, in the event of insolvency, the money would not end up with these beneficiaries, but with the insolvency administrator, asks the inspection service.


The perplexity continues until the public prosecutor then comes forward and justifies an withholding of pay, § 266a StGB. The friendly letter leaves the penalty open – the managing partner should please comment on this: He’s talking out of his ass. In the end, the company share in his Mittelstands-GmbH is also seized and auctioned off. This is then “full-service” – i.e. tax and financial advice from a single source.


Later, with a lot of rest in state accommodation, the ex-manager remembers the green tea in the financial house, and how reassured he was about the competence in illegal legal advice, completely unaware of the mathematical connections, so naive also about legal obligations. The ZWK was a great tax-saving scheme, he was told. He had probably misunderstood something at the time – and hadn’t even reckoned with double taxes and criminal proceedings. The examination service of the DRV has this in the meantime systematically on the agenda – for concerning it is only a question of the time, until also them at the turn are.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.

About the author

Dr. Johannes Fiala Dr. Johannes Fiala

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.
»More about Dr. Johannes Fiala

On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.

Arrange your personal appointment with us.

Make an appointment / call back service

You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.

Obtain a second legal opinion

(The first phone call is a free get-to-know-you conversation; without consulting. You will learn what we can do for you & what we need from you in terms of information, documents for a qualified consultation.)