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Created on Saturday, 08 November 2008 00:06

Last Updated on Friday, 28 December 2012 18:52

Money Received for a Friendly Turn is Taxable

The BFH made a rather delicate decision that severely affects friendships or acquaintanceships whenever money is involved.

§22 no. 3 EStG stipulates as other income all actions, tolerations and forbearances, that are related to payments. These payments have to be made in the context of some kind of contractual relationship. You are not required to draw up a formal written contract for this. Any oral or specially written contract leading to a payment qualifies as taxable income. How was this discovered? A former friend told the local Finanazamt.

In other words, if you really want to do somebody a favor, do it either totally without payment or for a favor in return. Neither of the last two options will lead to taxation.




Published on the old CMS: 2007/3/5
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