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Child Benefits with Foreign Residence but with Domestic Income
Does a taxpayer residing abroad earning domestic income from business operations or from renting and leasing a domestic property entitle him to receive child benefits? The Federal Fiscal Court answered this fascinating question on March 23, 2021 (re III R 11/20, published on July 29, 2021).
Parents Living Abroad with Domestic Rental Income
The plaintiff, the mother of a daughter, leased out a hotel and generated commercial income from it in October 2015. In May 2016, she deregistered with the municipality with a new address in Italy. She had been receiving child benefits during those years. Due to their deregistration, the family benefits office cancelled the child benefit assessment for the daughter for the months June 2016 to October 2017 and wanted to be reimbursed for the benefits incorrectly paid.
Entitlement to Child Benefits for the Entire Period of the Lease
Without question, the plaintiff is no longer a domestic taxpayer and not even a resident of Germany. However, this is not relevant. She is entitled to child benefits pursuant to §62 I 1 no. 2(b) EStG. The requirements for unlimited tax liability under §1 III EStG were met. According to its annual financial statements, the plaintiff had earned income from business operations in Germany according to §49 I no. 2 EStG. The questions/disputes raised by the tax office could be left open because the income tax assessment is binding for claims of child benefits unless it is based on incorrect information provided by the taxpayer. Eligibility for child benefits exists when the taxpayer is commercially active during any given month.
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