When time value accounts lead to criminal prosecution and employer liability

Time value accounts (ZWK) are used to shift social insurance and payroll tax contributions into the future. Such ZWK arrangements are not recognised for tax purposes in the case of members of the management boards of public limited companies and managing directors of private limited companies, as the Federal Minister of Finance clarified (letter dated 17 June 2009, BStBl. I p.1286 ff.). The legislator had already previously established the incompatibility of the ZWK with a position as an organ (BT printed paper 17/8991, pages 23 f.). This was also recently confirmed by the Federal Court of Finance (BFH) in its ruling of 11.11.2015 (Ref. I R 26/15).


Generate time value accounts of managers up to double salary taxation

ZWK models for tax optimisation for corporate bodies are regularly used by the tax auditor during an external wage tax audit, because the transfer to the ZWK already leads to wage tax liability – after a tax audit plus late payment surcharges or evasion interest. An excusable error of law does not usually exist – especially since the fault of the own StB is attributed to the employer. Consequently, subsequent taxation will take place, § 39b EStG, R 39b 5 LStR 2015.


Members of the Management Board and managing directors as personal liability debtors

First of all, the employer is liable, and must reclaim this from the manager, § 42 d I No.1 Income tax. In addition, the managers are also personally liable to the tax office, §§ 33 ff. in conjunction with 69 ff. AO, even if he ultimately does not receive any payment from the ZWK due to the employer’s insolvency. The insolvency of the employer therefore does not result in a loss of tax revenue for the tax office. If the employer’s recourse to the executive bodies is not taken as an economic advantage for the managers, wage tax is again due as soon as the original (wage tax) liability debt is paid as determined by the tax audit.


Additional tax payments due to hidden profit distribution (vGA)

Under Section 8 III 2 KStG, a vGA may not reduce the income of the corporation. This concerns managers who are also controlling shareholders of their GmbH or AG. Control can be based on a majority of the voting rights (conceivably also through indirect participations), or if the majority of votes is based on cooperation in the case of similar interests of the shareholders; or if de facto control is achieved through other agreements. A mere majority of capital is not important.

In this case, no remuneration components may be paid which a conscientious manager would not have granted to a non-shareholder as manager under comparable circumstances. This foreign custom is already lacking if there is no clear, unambiguous agreement made in advance and then actually implemented (BGH, ruling of 23.10.2013, Ref. I R 60/12). Uncertainty(s) in the ZWK agreement as well as granted decision-making powers on the ZWK allocation thus lead to the vGA (FG Saarland, judgement of 24.03.2015, Az. 1 K 1170/11). The provisions set aside by the employer on account of the ZWK agreement with the managing directors of the shareholders “reduce income” each year result in a vGA in full” (BFH. loc.cit.).


When the auditor rings twice

The next surprise for the managing director is when the employee of the German Pension Insurance (DRV), who works every four years, also reports to the auditing service of the German Pension Insurance and complains about the insufficient insolvency protection of the ZWK credit balance, so that social insurance including surcharges for late payment have to be paid in arrears.

More often there is no effective agreement under which the trustee is granted full transfer of objects or rights as a means of security against insolvency, i.e. becomes owner, creditor or holder of rights, § 7e I SGB IV. There is often a lack of clear agreements on how to proceed (also) “in the event of a disruption” in insolvency. Or a comprehensible (security) agreement between trustee and employee is missing. Nor can the employee or manager act as trustee himself (to save costs), because the trustee must also contractually and de facto exclude the return of the value credit to the employer.

Finally, the funds in the trustee’s hands must at all times cover 100% of the value of the assets (including the employer’s social security contribution), which is often not (no longer) the case due to acquisition costs, ongoing administrative costs, commissions, fees and fluctuations in the value of the investments, § 7d SGB IV. In this case it would be necessary to purchase a (value retention) guarantee from a risk carrier, § 7d III SGB IV. Only in exceptional cases may the proportion of shares and equity funds exceed the limit of 20%.


Consultant liability mostly preprogrammed

For the tax adviser, there is not only the risk of a liability as a debtor of recourse for (evasion) interest, late payment, late payment surcharges – but also for fines on the part of his clients, i.e. the employer and the managers. This only applies if the managing director, as a body of the employer, acted intentionally.

The contractual design when setting up ZWK models (including occupational pension schemes) often constitutes a prohibited legal service. The fee for the ZWK consultancy can be reclaimed (AG Schwäbisch Gmünd, judgement of 26.08.2010, ref. 2 C 995/09). The intermediary or consultant without admission to legal advice is nevertheless liable to recourse for design errors (BGH, judgment of 20.03.2008, Az. IX ZR 238/06).

If the consulting or structuring contract contains both permitted and prohibited services, in case of doubt, the contract is void as a whole, §§ 134, 139 BGB. The professional liability insurance does not cover the costs; however, the ZWK consultant is personally liable and cannot “hide” behind a Beratungs-GmbH, because §§ 1 ff. RDG are a protective law in terms of tort according to § 823 BGB. In addition, fraud and deliberate immoral damage to the ZWK advisor are then often the order of the day (OLG Nuremberg, judgment of 10.04.2014, Az. 8 U 627/13). Due to forbidden legal services, the consultant is liable for all damages, despite the void ZWK consultancy contract, if only due to his fault at the time of the conclusion of the contract, §§ 311, 241 BGB – even if he is not otherwise responsible for the damage. If the ZWK advisor uses a lawyer or in-house counsel, this does not change anything, because the ZWK advisor would nevertheless always need a personal permission for legal advice, which he does not regularly have (BGH, judgement of 3 July 2008, file no. III ZR 260/07).



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


by courtesy of

www.procontra-online.de (published on 01.02.2017)







Publisher C.H.BECK oHG

Editorial office “BC – Zeitschrift für Bilanzierung, Rechnungswesen und Controlling

published in BC 3/2017 under the heading Time value accounts lead to criminal prosecution and employer liability for charges

Link: http://rsw.beck.de/cms/main?docid=385601


www.experten.de (published in the Expert Report 07-2017, pages 74-75 under the heading: Time value accounts lead to criminal prosecution and employer liability for charges)


www.handwerke.de (published in Computern im Handwerk, issue September 2017, page 6-7 under the heading: Time value accounts lead to criminal prosecution and employer liability for charges)

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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.
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