Federal Fiscal Court rules: Plain rolls and coffee do not constitute breakfast

The Federal Fiscal Court has ruled that plain rolls, coffee, and tea do not constitute breakfast. Understandably, you may wonder why the Federal Fiscal Court has to decide what counts as breakfast. Of course, the ruling has nothing to do with the general definition of breakfast. In your private life, coffee can still be part of breakfast. Rather, the issue is how breakfast is defined by the tax authorities. In today’s post, as tax advisors in Düsseldorf
and Oberhausen
, we will explain what the Federal Fiscal Court has decided and highlight why the ruling could be very relevant for some business owners.

Background: Breakfast is part of wages

Before we delve into the current case law, the basics should be clear. From a tax perspective, in addition to salary, other benefits are also considered part of wages. So if an employee receives an alternative form of compensation for their work, this is regarded as monetary value and is subject to income tax along with their salary. Meals are also included in such benefits. Therefore, if an employer provides breakfast to employees, this is considered compensation for work performed. As a result, even this seemingly insignificant breakfast is subject to taxation.

Lawsuit at the Federal Fiscal Court: Unfilled rolls and coffee should not constitute breakfast

Now that it has become clear that breakfast can generally be subject to tax, the question arises as to what constitutes breakfast. The term “breakfast” is not defined in tax law. The question of what constitutes breakfast has therefore recently made its way to the Federal Fiscal Court.

A company in the software industry had filed a lawsuit. The company’s employees were provided with plain rolls every day. These included, among others, pretzel rolls, cheese rolls, chocolate rolls, cheese-and-pumpkin rolls, rye rolls, and raisin rolls. Coffee and tea were also provided. A key factor in the case is that no toppings were provided for the rolls. The food was available all day. However, the majority of the rolls were consumed during the paid half-hour break between 9:30 a.m. and 11:00 a.m. The plaintiff did not consider this to constitute a taxable breakfast. The tax office, on the other hand, viewed it as taxable wages and demanded back income tax.

Convinced that plain rolls and coffee alone do not constitute breakfast for tax purposes, the AG filed a lawsuit. The Federal Fiscal Court was subsequently required to address this somewhat unusual question.

Decision: Federal Fiscal Court Defines “Breakfast”

The Federal Fiscal Court upheld the lawsuit. Plain rolls, coffee, and tea are not to be considered breakfast for tax purposes. Accordingly, no income tax is due. The decision was justified as follows:

• First, it was clarified that the provision of rolls and beverages does not, in principle, constitute wages. This is because it is not a consideration in exchange for work, but merely a gesture of goodwill. The rolls were provided to all employees without distinction. Furthermore, they were primarily consumed during paid work breaks. The employer thereby created favorable working conditions for interaction among employees. Consequently, this does not constitute taxable wages.
• It was further explained that the benefits provided were of only a minor nature. For a breakfast—in the tax sense—sandwiches are generally required. The plain rolls are not sufficient to justify taxation. Nor can coffee or tea be considered breakfast without rolls served with butter, cold cuts, cheese, or jam.

It is questionable why this issue had to lead to a full-scale lawsuit in the first place. Even the tax authorities often do not consider the provision of beverages and luxury foods for consumption at the workplace to be wages. Presumably, this case appeared to be a special exception because the employer offered “special” options in terms of variety and quality. The question of whether a “special” or “high-quality” chocolate roll leads to a different assessment was also addressed by the Federal Fiscal Court. The Federal Fiscal Court expressly rejected the idea of distinguishing based on the quality of the baked goods. It stated that this is not a suitable criterion for a mass proceeding, as is found in income tax law.

Any questions? Tax advisors from Düsseldorf and Oberhausen

The case described is certainly particularly bizarre and also a rarity in tax law. However, this real-world example clearly shows that there are still uncertainties and points of contention in tax law. As an entrepreneur, you should therefore always carefully consider how a situation should be assessed for tax purposes. We are aware that many business owners find it difficult to keep up with the latest tax law developments. That is why, as tax advisors in Düsseldorf and Oberhausen, we specialize in assisting companies across a wide range of industries with tax-related matters. Are you looking for a good and reliable tax advisor? Our team of qualified tax advisors and certified public accountants handles a wide range of tasks. Simply contact us to schedule a consultation.