Germany must grant its household-services and craftsperson-services income-tax reduction to an employed frontier worker for work done in that worker's Swiss household
Europa on the same terms as for households inside the Union or the European Economic AreaEuropa. In Case C-223/25 the Court of Justice (First Chamber) held that Articles 1, 2, 7 and 15 of the Agreement on the free movement of persons (AFMP), read with Article 9(2) of Annex I, preclude Paragraph 35a(4) of the Einkommensteuergesetz (EStG)Europa in so far as it reserves the relief to households in the Union or the EEAEuropa and denies it for a frontier worker's household in SwitzerlandEuropa.
The case concerns spouses BT and CY, both German and Swiss nationalsEuropa living in their own house in SwitzerlandEuropa. BT works for a German companyEuropa, lived alone in a German flat since 2015, worked and lived in Germany during the week in 2019Europa and returned to Switzerland at weekendsEuropa. In 2019 they had Swiss tradespeople and a gardening company work on the Swiss houseEuropaEuropa and paid the labour costs against invoicesEuropa. CY elected unlimited German tax liabilityEuropa and joint assessment with BTEuropa. After the 26 February 2021 assessment they sought amendment to claim Paragraph 35a(2) to (5) relief; the tax office refused because the services were performed in SwitzerlandEuropa, and the Finanzgericht Köln referred the questionEuropa.
Paragraph 35a EStG cuts income tax by 20 % of eligible labour costs onlyEuropa, capped at EUR 4 000 for household servicesEuropa and EUR 1 200 for craftsperson workEuropa, requiring an invoice and bank transfer; Paragraph 35a(4) limits it to Union or EEA householdsEuropa. The Court treated the cut as a tax advantage under Article 9(2) of Annex IEuropa, guaranteeing the same tax concessions as national employed personsEuropa.
Dual nationality did not bar reliance on the AFMPEuropa: nationals of a Contracting Party may invoke it against their own country in the applicable circumstancesEuropa. BT qualified as an employed frontier worker under Article 7(1) of Annex IEuropa — a Contracting Party national resident in one Contracting Party, employed in the other, returning home as a rule daily or at least weekly — because the Swiss family home was his main residence with weekend returnsEuropa; the additional German flat near work does not defeat that statusEuropa. CY, jointly assessed as a family member, shares the claim.Europa
The household-location criterion amounts to covert nationality discrimination.Europa A frontier worker by definition resides outside the State of employmentEuropa, so the condition generally shuts Swiss-resident frontier workers out — the same effect as a residence criterionEuropa, which pre-signature case-law treats as covert discriminationEuropa applicable through Article 16(2) AFMP. Article 21(2) AFMP, allowing different tax treatment of non-comparable situationsEuropa, does not save the ruleEuropa: BT is subject to unlimited German tax liabilityEuropa, so he is not in an objectively different position from residentsEuropa, and the relief turns on a fixed percentage of expenditure rather than personal ability to payEuropa.
Neither justification succeeded. Combating undeclared work is accepted under the AFMPEuropa, but excluding Swiss households is not aptEuropa: invoices plus account payment already secure declaration, and Swiss providers may supply services in Germany within 90 days per yearEuropa. Cohesion failed for want of the direct link between advantage and levy.Europa Main-proceedings costs are for the referring court.Europa The legal basis is one closing sentence: the ruling interprets Articles 1, 2, 7 and 15 AFMP with Article 9(2) of Annex IEuropa, applying Articles 21(2), 5(1) and 16(2) on comparability, services and interpretationEuropa.
Review denied Paragraph 35a EStG claims for Swiss-household services by employed frontier workers for 2019 onwards and re-claim the 20 % relief with invoice and bank-transfer proof.
