Tax treatment of premiums for compulsory Swiss accident insurance

Situation

A German couple resident in Germany worked in Switzerland. Their income from non-self-employed work was taxed domestically under the cross-border commuter rule. As employees in Switzerland, they are compulsorily insured under the Swiss accident insurance scheme. The insurance provides protection in the event of occupational accidents, occupational illnesses and non-occupational accidents (in Switzerland, in contrast to Germany, commuting accidents to/from work are also included).

The premiums for non-occupational accident insurance (NBUV) under the Swiss accident insurance scheme must be paid by the employee.

In the case in question, this premium was deducted from the wife’s salary. For the spouse, on the other hand, the employer paid the premium for the NBUV.

The tax office increased the husband’s taxable salary by the premium for the NBUV paid by the employer. In addition, half of the premiums were taken into account as income-related expenses and the other half as special expenses. However, the special expenses deduction had no tax effect, as the maximum amount had already been exceeded.

The action was partially successful before the FG Baden-Württemberg (appeal is pending before the BFH).

Explanation of the FG

It assumes that it is a question of taxable wages. Pursuant to section 19, paragraph 1, sentence 1, no. 1 of the Income Tax Act, income from non-independent work includes salaries, wages, gratuities, bonuses and other remuneration or benefits granted for employment.

Wages and salaries are any benefit that is caused by the individual employment relationship. This also includes expenditures made by the employer to insure his employee or a person close to him in case of illness, accident, invalidity, old age or death.

The Regional Tax Court qualified the premium as taxable wages and treated parts of the premium as a contribution to a basic health insurance [within the meaning of §10, para. 1, no. 3, subpara. a), sentence 3 of the Income Tax Act].

The premium is not considered tax-exempt according to §3 no. 62 p. 1 EStG, as it concerns benefits voluntarily provided by the employer.

With regard to the care benefits and cost reimbursements, the insurance benefits of the NBUV correspond to the benefits of a basic health insurance. Therefore, parts of the premium are deductible without limitation as special expenses as a contribution to a domestic basic health insurance (§ 10 para. 1 no. 3 letter a) sentence 3 EStG). Only the premiums attributable to treatment costs for non-occupational accidents are deductible. Not deductible, on the other hand, are the portions of the premiums attributable to sickness benefits and to coverage of the financial consequences of a leisure-time accident.

The court dealt with the question of whether it is possible to split the entire premiums for a NBUV. According to long-standing administrative practice of the OFD Karlsruhe, the share of premiums to the NBUV attributable to the coverage of the risk of accidents on the way to and from the place of work is estimated at 50 % of the premiums. In the opinion of the Regional Court, it is questionable whether this approach leads to correct taxation. This question must now be answered in the pending appeal proceedings of the BFH.