The claim to child benefit in the subordinate state (Germany) is not excluded pursuant to Art. 68 (2) sentence 3 of Regulation 883/2004 if there is only a claim in the subordinate state but the substantive requirements for a claim in the priority state (Poland) are not met.
Facts of the case:
The father (V) is a Polish citizen and has been married since June 2010. He is domiciled in Germany and was not gainfully employed during the period in dispute.
The son (A) lives in the household of V and his wife (F) in Poland. F has agreed that the child benefit is paid to V. F was not gainfully employed. The spouses did not receive child benefit for A in Poland because the family income exceeded the income limit valid in the period of grant.
The child benefit (statutory amount) for A was initially paid by the family benefits office. In 2017, the child benefit assessment for the period in dispute was cancelled.
Reason: V had only submitted evidence of self-employment for the periods June to December 2014 and May to December 2015, but not for the period in dispute. The child benefit claim was therefore deemed to be excluded according to the principle of residence (Art. 68 para. 2 sentence 3 of the Regulation No. 883/2004).
The Cologne Regional Tax Court upheld the action on the grounds that the national child benefit claim was not excluded under EU law.
The BFH follows the FG. V is entitled to the full amount of German child benefit. The entitlement to German child benefit is not excluded by Article 68(2) sentence 3 of Regulation 883/2004. Since there is no claim in Poland and thus no competing claims, the priority rule does not apply.
Relevance for practical application:
The result arrived at by the BFH by interpreting the provisions of European law, in particular the wording of Art. 68 of Regulation No. 883/2004, may seem strange. Germany does not have to pay a differential amount (differential child benefit) in the case of only a small foreign family benefit if the corresponding benefit entitlement is triggered solely by the place of residence and the child lives in the other Member State. On the other hand, the full domestic child benefit entitlement must be met if there is no entitlement at all in the priority Member State. However, this result is acceptable because it complies with European law.