Taxes on relocation compensation payments

Just had the shock of finding out that the moving compensation that was said to be tax free was actually not. When we found out we had to prove we had spent a certain amount of it, with receipts to remain tax free we went out and bought a piece of furniture to reach that amount. We just got the shock email from the employer telling us furniture is not covered in moving compensation so the money will be taxed! This is rather annoying, I was wondering how this gets taxed? Do they tax it as part of your income or do they tax it as a lump sum? Does anyone have any experience with this?

Moving compensation is tax free only
- to the amount that you actually spent on moving related costs
- to the amount that could be considered income-related expenses (job-related move)
- to the maximum described in the "Bundesumzugskostengesetzes" (within germany) or "Auslandsumzugskostenverordnung" (outside germany)
You have to offer proof (bills) of your expenses to your employer. Everything that isnt tax free, will be treated as additional salary.

Thats what I know. You might want to ask your tax advisor to get a reliable answer.

The system is amazingly generous by UK standards.
You can offset things you would never have dreamt of.
Like running costs for a second home (for up to 6 months?).
Even many Germans do not know how generous the tax man
is when you move.
Read up the info or get a Steuerberater - and get proof of every
item of expenditure that could possibly be related to your move.
(Travel to and from previous abode for example).

Iain,
I had this problem when I first moved here from the UK.
In the UK any moving allowance is tax-free so I just expected it to be the same here, it wasn't.

My moving allowance was an agreed lump sum which I received through my monthly salary, in a lump sum, one month.
This was taxed just like my normal salary, so I basically lost almost half of it.

There are many things that can be claimed against tax as part of a move, but also many that can't.

I can only agree with the above sentiments that you should get yourself a tax consultant and let them sort it for you.
MT

If you are paying almost 50% income tax "delta" then you are earning a pretty good salary... Certainly far more than I...

Yes, I WAS earning a reasonable salary, but as a single person it seems quite normal to lose almost half your pay in stoppages. But remember, this is not just income tax, but includes all stoppages ... health insurance .. .etc.

I also found that a good tax consultant is well worth the fee as they will often be able to get a large amount back, especially in these special situations like moving.
MT