Stipends

Stipends and prize money are not always subject to income tax. What matters is how they are related to the professional activity and whether they can be considered operating revenues or not. 

Taxation of prize money

Cash awards are generally subject to income tax if they are linked to the recipient’s professional activity and they are awarded to pursue an artistic or creative activity. In this case they are considered operating revenue, especially if the costs for producing the winning work are tax relevant (if the materials purchased are deducted or travel costs associated with the creation of the work are claimed on the tax return, etc.).  
  
However, if the life’s work or the complete works or the personality of an awardee is honored, the associated cash award may be tax-free income (as one-time income). One characteristic here is that the awardee did not incur any immediate expenses to receive the award.

Cf. Letter of the BMF about the taxation of prize money (only available in German)

Prize money that is subject to income tax and awarded by a foreign institution is taxable either in Germany or the other country depending on the applicable DTA (double taxation agreement). 

Taxation of stipends

Stipends are tax free if they come from public sources and serve the promotion of artistic education and training. These stipends, which are usually awarded to young artists, primarily serve to cover the cost of living during an education or training period and are subject to certain requirements (for example, no requirement of an artistic service in return, etc.). 
  
Stipends granted in connection with a service by the artists are subject to income tax.  

A distinction can be made on the basis of expenditures: If the expenses that are covered by the stipends are not tax deductible (for example, the cost of living), the stipend is tax free.

Fact sheet Möglichkeiten der Einkommenssteuerbefreiung von Stipendien (income tax exemption for scholarships- only available in German)
by Agentur für fast alles and Kanzlei Laaser (only available in German)

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