Child benefit entitlement for voluntary service between Bachelor's and Master's degree course
Court ruling: No entitlement to child benefit for voluntary service between Bachelor's and Master's degree course
When are several stages of education, such as a Bachelor's and Master's degree, considered to be the same initial education, and how does voluntary service between the courses affect the entitlement to child benefit? The Federal Fiscal Court has issued the following ruling.
As the Federal Fiscal Court (BFH) ruled in its judgment of 12.10.2023 - III R 10/22, a uniform initial education consisting of several educational phases (e.g. Bachelor's and Master's degree in the same subject) only exists if the individual educational phases are closely related to each other in terms of content and time.
The close temporal connection is only ensured if the child takes up the next part of the multi-track education, e.g. the Master's degree course, at the next possible date. This is not the case if the child completes voluntary service in between instead of continuing their education immediately. The consequence of this is that the initial training is completed with the previous training phase, so that the person entitled to child benefit only retains an entitlement to child benefit in the subsequent period if the child does not work or no longer works 20 hours per week.
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The case
The plaintiff is the father of a daughter born in February 1996, who graduated with a Bachelor of Science degree in C at the end of the 2018 summer semester. In the months of October 2018 up to and including May 2019, the daughter completed a voluntary service. In July 2019, she was admitted to the Master's degree program in C, which she began in October 2019. Between July and September 2019 (period in dispute), the daughter worked as a temporary employee for 25 hours per week. The family benefits office was of the opinion that the claimant should not be granted child benefit due to the daughter's more than minor employment during the period in dispute.
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Reasons for the judgment
The tax court (Finanzgericht, FG) upheld the appeal. The BFH found the appeal by the family benefits office to be justified. It was true that the daughter was also to be taken into account under child benefit law in the months in dispute until the start of her Master's degree course because she was only able to start this course at the beginning of the 2019/2020 winter semester (Section 32 para. 4 sentence 1 no. 2 letter c of the German Income Tax Act (Einkommensteuergesetz -EStG)). However, adult children who have not yet reached the age of 25 are only to be taken into account for child benefit purposes after completing their initial education if they are not in gainful employment for more than 20 hours per week (Section 32 (4) sentences 2 and 3 EStG). The tax court had wrongly considered the bachelor's and master's degree courses to be part of a uniform initial education. Due to the voluntary service completed by the daughter in the meantime, the required close temporal connection between the parts of the education was missing. The extent of the gainful employment was therefore relevant. As this was above the limit of 20 hours per week, no child benefit could be granted.
Source: Press release of the Federal Fiscal Court, see also III R 10/22.
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