German Church Tax Update

Last fall we wrote about the increased enforcement of the German Church Tax (German Church Tax Causes Controversy), in particular the enforcement of this tax on capital gains. The tax is levied by the state at 8-9% of the regular income tax for members of certain mainline churches – primarily Catholic and Lutheran church members. This tax is then passed on to the churches for use in their operations and charitable activities. The tax is only levied against registered members of Catholic, Protestant, or Jewish churches. The system does not rely on self-reporting as some churches have gotten rather aggressive against those who are alleged members of the Church but do not report being a member of a church.

As enforcement of the tax has increased, more and more church members are “de-registering” – removing their names from the church rolls, even though they continue attending the church and participating in church activities. In fact, some of these have continued to support the church through tithes and offerings given directly to the church.

The number of people de-registering has been such a concern for the Catholic church that, in 2012, the German bishops issued a decree stating that de-registration is a serious lapse and specified that those who do not pay the tax will be barred from receiving the sacraments of Confession, Communion, Confirmation, or Anointing of the Sick, except when in danger of death. In addition, those deregistering cannot hold an ecclesial office or perform functions within the church; cannot be a godparent or sponsor; cannot be a member of diocesan or parish councils; and cannot be member of public associations of the church. These measures have been referred to as “de facto excommunication,” and those showing no sign of repentance before their death can be refused a religious burial. In essence, according to some in the church, “putting their souls in danger of eternal damnation.”

Non-Germans moving to Germany are frequently surprised to find questions on their immigration documents relating to church membership, as they may be subject to the tax. Under German law, anyone who has been baptized is a member of the church and subject to the tax. One can file with the state that they have left the church, but there is a fee for doing this. The Catholic Church, in particular, has been rather aggressive in pursuing members of the church who do not claim membership. The German Catholic Church has threatened to take Italian soccer player Luca Toni to court over unpaid German church taxes, claiming that he failed to pay the tax while playing for the Bayern Munich from 2007-2010. The alleged debt is 1.5% million euros plus interest of 200,000 euros.

There has been concern in recent years that the church is avoiding social-political topics for fear of hostile reactions from members who may then choose to leave the church, further eroding their tax base. As Martin Lohmann, Catholic publicist stated the church “will remain limited and not-free, darkened, and in a state without courage to proclaim the truth” as long this tax remains in effect. It is lamentable that the church has become so dependent on the tax for its continued existence, rather than relying on the tithes and offerings from members.

Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.

Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.

He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.

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