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Created on Sunday, 08 May 2011 15:55

Last Updated on Friday, 28 December 2012 18:57

Teaching Tradesman - Eligible for Professional Services?

An insurance broker is without any question a trade and so also subject to trade tax. It often happens that successful brokers teach colleagues the newest insurance legal details. Cannot this income by its own be eligible for nothing more than income taxation? FG Münster decided exactly on this question with it decision of December 17, 2010 (re 4 K 3554/08 G).

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Jerry an outstanding insurance salesman took over the extra task to teach colleagues current sales techniques and insurance legal questions especially concerning the needs of physicians. He was paid a success fee. He filed his tax return with income from trade and profession (= teaching). His tax office did not accept the income as professional. Not wanting to accept this Jerry sought legal recourse in the Tax Court of Münster.

The court held that Jerry had income from trade in terms of §15 EStG and not professional income. Professional income from teaching requires that a teacher passes on his knowledge to his students in an organized and institution based manner. Though the tasks of an insurance consultant included instructional elements this was not the main point of his work. His function was more a team leader of brokers. Since Jerry was clearly placed inside the company's structure, the court could not find the institution based teaching. His position also missed the "teacher student relationship" of sharing abstract knowledge rather it was more a type of on-the-job training.

As Jerry also had passed the relevant turnover threshold, the tax office required him to keep books and not only keeping records on his tax details.

Hint:

The eligibility of professional income can mostly be determined only on a case by case basis - especially when combined with other income. As this story shows, the difference can be "traumatic".