Inflow of unpaid royalties

Irrespective of whether bonuses are actually paid out, they are deemed to be due and received by a controlling shareholder-managing director upon adoption of the annual financial statements, unless otherwise agreed.

The bonuses for a GmbH managing director are part of the taxable salary. However, taxation depends on the fact that they have also accrued to the managing director. The Federal Fiscal Court has now had to deal with a case in which the bonuses were neither paid out nor taken into account by the GmbH when preparing the annual financial statements. Nevertheless, the tax office assumed a taxable inflow because the managing director's employment contract provided for a bonus entitlement.

The Federal Fiscal Court initially confirmed that a controlling shareholder-managing director receives the income from bonus claims against his GmbH when they fall due, regardless of whether they are actually paid out. The bonus claim becomes due when the annual financial statements are adopted, unless the contracting parties have effectively agreed a different due date in the employment contract in accordance with civil law and at arm's length.

In contrast to the corresponding administrative instruction of the tax authorities, however, the judges also expressly stated that bonus claims that are not shown in the adopted annual financial statements do not accrue to the controlling shareholder-managing director. This also applies if a corresponding liability should have been recognized in the annual financial statements in accordance with the principles of proper accounting.

Despite this ruling, every shareholder-managing director is well advised to expressly regulate the waiver of a bonus in advance, as otherwise there is always the threat of taxation as wages and classification as a hidden contribution. In addition, the employment contract of a controlling shareholder-managing director is subject to an implementation requirement: If the contractual provisions are not implemented as agreed, the entire remuneration of the managing director can be reclassified as a hidden profit distribution.