The Federal Tax Court of Germany had to deal with continued salary payments and severance payments after a suspension of the underlying employment contract. This suspension lasted from the end of April until the end of October; only then would the contract finally end, and the continued salary payments would stop. The court had to decide whether the payments were taxable in Germany, as the employee was resident in Germany but carried out work in Switzerland. The Federal Tax Court of Germany ruled that the continued payments were a result of the ongoing but suspended employment contract. However, since no work was being performed anymore Art 15 para 1 DTC Germany – Switzerland applied, granting Germany the exclusive taxing right. Furthermore, the severance payments are exclusively taxable in Germany as the payments are received as a compensation for the loss of employment. In addition, the court continued its jurisprudence regarding consultation agreements, considering them to be limited by the letters of the law of the treaty. Michael Lang discusses the ruling in detail, while also comparing it to similar rulings from Austrian and Swiss courts and to past decisions from the Federal Tax Court of Germany.
