Tax bonus for Switzerland? ECJ decides
Cologne tax court appeals to ECJ: Tax reduction for handyman services in Swiss household questionable
In a ruling dated February 20, 2025 (case no. 7 K 1204/22), the Cologne Fiscal Court referred the question to the European Court of Justice for a preliminary ruling as to whether the current limitation of the tax reduction for craftsmen’s services to households within the European Union and the European Economic Area is compatible with the Agreement on the Free Movement of Persons between the EU and Switzerland.
In the case in dispute, the taxpayer and his spouse lived in Switzerland. The husband was employed in Germany and maintained an apartment there. The couple commissioned various craftsmen and gardening work for their shared house in Switzerland and applied for an income tax reduction in accordance with Section 35a EStG. The tax office rejected this with reference to the location of the household outside of the tax-privileged area.
The plaintiffs argued that the Agreement on the Free Movement of Persons between the EU and Switzerland also provides for equal treatment with regard to tax benefits. The statutory limitation to households in the EU/EEA area could therefore violate this agreement.
The Cologne tax court considers the regulation to be a possible disadvantage compared to taxpayers resident within the EU or the EEA and has referred the question to the ECJ for clarification.
Recommendation for action:
In comparable cases, the application for tax relief should be made despite the foreign residence and an appeal should be lodged in the event of a rejection in order to keep the proceedings open until the ECJ’s decision.
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