In our series “Insights into the German tax system” we take a look at the new deadlines for retrospective child benefits claims effective from January 1, 2018. Child benefit in Germany is granted for children of minor age starting with the month of birth of the child, even if the actual claim is only submitted later. In some cases child benefits are also paid for children over the age of 18, up to the age of 25, if the child has not completed school or vocational education or is still studying at university. In this case a new claim for child benefits has to be submitted, together with the necessary proof.
The Institution responsible for paying child benefits is the „Familienkassen“ (Familiy Cashier Offices) at the employment agency (“Agentur für Arbeit”) in the city or community of the applicant or for employees of the public service, the employer or remuneration office.
Legal Situation until 31.12.2017
Currently the claim for child benefit is barred only after the expiry of the period of notice which is currently four years. (§ 169 Abs. 2 Satz 1 Nr. 2 AO). It was sufficient to submit a claim for child benefits for a child born in 2013 retrospectively until the 31.12.1017, as the claim inhibits the limitation period. The child benefit was then paid to the parent /legal guardian even after the 4 years had elapsed.
New Regulations from 01.01.2018
For all applications for child benefit submitted from 01.01.2018, the retrospective payment period for child benefit is shortened from the previous four years to six months. The deadline concerns only the payment, not the child benefit claim per se. Even if the “Familienkasse” (Familiy Cashier Offices) determines that an entitlement to child benefits existed for more than six months with retroactive effect, it will only pay out the benifits for the past six months prior to receipt of the application and state that in the reply.
The legal basis of this amendment is the Tax Avoidance Act of 23 June 2017 (BGBl. I p. 1682), which was introduced to circumvent abuse and fraud. Accordingly, from 01.01.2018 the regulations of §66 EstG, concerning the amount and the payment period of child benefits, will be supplemented by the new paragraph 3:
“Child benefit will only be paid retrospectively for a period of 6 month before the month when the benefit claim was submitted.”
Consequently, claims are taken into account as before (determination procedure), but the payments will only be made by the “Familienkasse” up to six month before the claim was submitted (collection procedure).
As child benefits are automatically paid and adjusted up to the age of 18 from the time of application at birth of the offspring, it is then often forgotten.
However, due to the manifold possibilities of educational and vocational training beyond the age of 18, many parents do not know that they are entitled to child benefits during vocational training (or also while waiting for a second vocational training), university studies after a vocational training or for example during social services abroad.
We advise to check the prerequisites for this as quickly as possible from next year on, as you will now have only six months to complete the corresponding retroactive application. If possible the application for retrospective child benefit should be submitted until 31 December 2017, if the eligibility period is longer than half a year.
In the case of adult children between the ages of 18 and 25, as a precautionary measure, an application for child benefit should be made to the “Familienkasse” (Familiy Cashier Offices), if a claim seems possible. If there is a lack of supporting documents, those documents can be submitted later after a simultaneous request for an extension of the deadline.
Finally, it should be noted that as part of the personal income tax return there is still a so-called “Günstigerprüfung” (reduced rate test) carried out, between the child benefit and child allowance.
The tax office determines automatically whether child benefit or child allowance is more beneficial for the taxpayer. However, the “Günstigerprüfung” (reduced rate test) takes into account the right to child benefit and not the actual pay-out.
If you have any questions regarding child benefit claims, we are happy to assist.