Unemployed Foreigner's Expenses for German Classes not Deductible

A Thai woman, Chutima, wanted to deduct the costs for German language classes from her taxes as "costs for the own vocational training". The tax office considered this as costs of living and therefore not deductible. The BFH decided in a ruling on March 15, 2007 (re VI R 14/04 [published July 4, 2007]) on the correctness of the tax office's opinion.

In the reported case, Chutima had been living in Germany with her German husband since 2001. Neither had she been employed in Germany nor had she ever been employed in Thailand. To be able to take on a training position, she started taking German courses in a public school. She wanted to deduct the costs of DM 1,519 as personal or special expenses (= Sonderausgaben), namely as costs for the "own professional education" (§10 I no. 7  EStG). Her tax office, however, rejected this.

The Finanzamt (= tax office) is of the opinion that these costs belong to the private sphere, pursuant to §12 no. 5 EStG. This section stipulates that expenses of a tax debtor for his or her first vocational training and for a first study at a university are not deductible as long as they did not occur within an occupation. Such costs are considered as those of non-deductible living costs.

In the ruling case law of the Bundesfinanzhof, costs for a first vocational training can be exceptionally treated as anticipated income-related expenses (= Werbungskosten) when these costs are in a concrete, objectively determinable connection with future taxable income from a professional activity. However, such costs may not reduce the taxable income if they simultaneously effect the costs of living of (§12 no. 1  EStG). Whenever this is the case, an unlimited deduction as income-related expenses can only then be considered and only exceptionally if the professional cause  greatly predominates and the private purpose is only marginal.

These requirements were not fulfilled for the language courses of the defendant. The achievable communication led only to foster the plaintiff's social integration and not enable any professional abilities. Since the private sphere dominated for these costs, they could not be considered as income-related costs.

These courses are also not deductible as education costs - pursuant to §10 I no. 7  EStG. This stipulation allows the married taxpayer to deduct € 8,000 on costs p.a. for learning a profession. This rule is also not applicable because the plaintiff was never employed - neither at home in Thailand nor in Germany.

Published on the old CMS: 2007/7/31

Read on the old CMS till November 2008: 163 reads