Düsseldorf process
The Düsseldorf procedure is a special, simplified procedure for taxing prostitution . It was regulated for the first time in 1966 in a decree of the then Oberfinanzdirektion Düsseldorf . The procedure is not regulated by law.
background
According to Section 40 of the Tax Code, it is irrelevant for taxation whether behavior violates a legal prohibition or good morals. Because prostitution was viewed as immoral in Germany up to the turn of the millennium, the financial administration faced the problem of setting and collecting the sales and income tax due on these activities. The theoretically prescribed tax obligations were in practice - due to the special circumstances in the milieu, e.g. Sometimes for reasons of disguising income or simply out of shame before the professional activity becomes known - only rarely fulfilled. The Oberfinanzdirektion Düsseldorf countered these problems as early as 1966 by collecting a lump-sum advance payment, which the brothel operators withhold from the respective room tenant per day.
Even after the introduction of the Prostitution Act , which is supposed to improve the legal and social situation of prostitutes, it is difficult for the tax authorities to collect taxes due to the discontinuity of the trade . Due to frequent changes of residence and the special conditions of the red light district , proper taxation is made considerably more difficult.
application
There are two basic cases of taxation for prostitutes:
On the one hand, the exercise of prostitution as a non-self-employed activity in a brothel. Signs of this would be an obligation to adhere to fixed working hours, a fixed basic remuneration regardless of the number of customers, an integration into a fixed operational workflow and being bound by instructions to the employer. The consequence of this would be a wage tax deduction by the brothel operator and social security obligation .
As a rule, prostitution is carried out as a self-employed activity. Although the practice of prostitution is not a trade within the meaning of the trade regulations (Germany) (Section 6, Paragraph 1) and therefore there is no obligation to submit a trade registration (Section 14 of the Trade Regulations), but an obligation to register in accordance with the Prostitute Protection Act , a prostitute is considered to be for tax purposes Trader within the meaning of Section 15 of the Income Tax Act and as an entrepreneur within the meaning of Section 2 of the Sales Tax Act with the corresponding obligations:
- Submission of sales tax advance returns,
- Performance of income tax advance payments of
- Submission of income, sales and possibly trade tax annual returns
- Records of operating income
As part of voluntary participation in the Düsseldorf procedure, the brothel operator can withhold a flat rate from the self-employed prostitute and pay it to the tax authorities, usually on a monthly or quarterly basis. The amount of this lump sum varies depending on the state or city and is between 7.50 and 30 euros per day of attendance of every prostitute who enters into monthly collection lists in the brothel. Participation in the Düsseldorf procedure is agreed with the tax investigators and should lead to an exemption from regular controls by the tax authorities.
The lump sum payment does not exempt prostitutes from filing a tax return or from complying with accounting and record-keeping obligations. On the other hand, the flat rate can be offset against the individual tax liability as an advance payment. For reasons of simplification, however, when participating in the procedure, the tax authorities often assume that the advance payments made correspond to the final tax liability. Because the prostitutes rarely submit a tax return, the flat-rate tax according to the Düsseldorf procedure has a de facto final effect in the majority of cases.
The procedure has nothing to do with the tax obligations of the brothel operator. For them, the applicable legal regulations remain. Since the respective operator is usually local and known, there is no need for a simplified procedure.
The Düsseldorf method is currently used in Baden-Württemberg, Berlin, Hesse, North Rhine-Westphalia, Rhineland-Palatinate, Saarland and Saxony.