Supposed simplification: the new travel expense law regarding taxes

For instance, the term „regel­mä­ß­ige Arbeits­stät­te“ (regu­lar work­place), which has always been con­tro­ver­sial, will be defi­ned by law as of 2014 and replaced by the term „erste Tätig­keits­stät­te“ (pri­mary place of work), which has not been tes­ted in practice. The emp­loyee has such a pri­mary place of work, that he is per­ma­nently assig­ned to, in a firmly estab­lis­hed place of busi­ness of the emp­loyer, a com­pany or a third party deter­mi­ned by the emp­loyer (espe­cially a custo­mer). In the future the emp­loyer will be able to spe­cify the loca­tion of this one parti­cu­lar pri­mary place of work in a tax effec­tive way by means of assign­ment. Whe­ther the emp­loyer spends most of his work time in the pri­mary work place is of no con­se­qu­ence here. It suf­fices if he only has a minor per­ma­nent emp­loy­ment there or he is merely emp­loyed there until furt­her notice even if it is only for minor sup­por­ting work such as picking up orders or a com­pany car. Hence, for tax pur­po­ses it is pos­si­ble to spe­cify a pri­mary work place that is dif­fe­rent from the place of work sti­pu­la­ted in the emp­loy­ment con­tract. Howe­ver, if the emp­loyer does not make an assign­ment or it is not clear tem­po­ral as well as quan­ti­ta­tive cri­te­ria take effect as sti­pu­la­ted by law: The pri­mary place of work is then deter­mi­ned based on where the emp­loyee typi­cally spends his work­days or two work days per work week or is sup­po­sed to spend at least one third of his agreed regu­lar work time. Sales rep­re­sen­ta­ti­ves for instance who have to tra­vel around visi­ting dif­fe­rent custo­mers do the­re­fore usually not have a pri­mary place of work.

The absence as well as the exp­li­cit spe­ci­fi­ca­tion of a pri­mary place of work has sub­stan­tial con­se­qu­en­ces: For trips bet­ween his resi­dence and the pri­mary place of work the emp­loyee can merely deduct the dis­tance tra­vel­led from his taxes but he can­not sub­mit tra­vel expen­ses. If there is no pri­mary place of work or work rela­ted trips are made to places other than the pri­mary place of work the actual costs or the lump sum of EUR 0.30 per kilo­me­ter are cate­go­ri­zed as income-rela­ted expen­ses pro­vi­ded that there is neit­her a “ga­the­ring point” sti­pu­la­ted by the com­pany nor an “ex­ten­sive work area”. Addi­tio­nally, if there is a suf­fi­ci­ent time of absence addi­tio­nal sub­sis­tence expen­ses and, if app­lica­ble, costs of accom­mo­da­tion can be deduc­ted or paid by the emp­loyer free of income tax.

At the end of the day it will be in the emp­loyee’s inte­rest not to have a pri­mary place of work or, if he does, the one that is clo­sest in dis­tance to his place of resi­dence. Emp­loy­ers that are requi­red to refund tra­vel expen­ses to their emp­loyees in the amo­unt that is exempt from income tax will strive to assign such a pri­mary place of work so as to keep the tra­vel expen­ses they have to refund to a mini­mum or at least pre­vent them from inc­rea­sing.
In order to avoid having dis­cus­si­ons with every single emp­loyee about the deter­mi­na­tion of their pri­mary place of work emp­loy­ers ought to check if homo­ge­neous regu­la­ti­ons are to be intro­du­ced for cer­tain groups of emp­loyees (such as tra­vel­ling and non-tra­vel­ling emp­loyees) or a dis­cus­sion can be depri­ved of its basis by means of pre­pa­ring or modi­fying tra­vel expense gui­de­li­nes as soon as pos­si­ble.

In the course of the sim­p­li­fi­ca­tion chan­ges were also made to the so cal­led „Drei­mo­nats­frist“ (three month period). In the case of exter­nal, long-term work rela­ted acti­vi­ties or two sepa­rate hou­se­holds addi­tio­nal sub­sis­tence expen­ses are only deduc­ti­ble wit­hin the first three months. If there is an inter­rup­tion of at least four weeks the three month period starts over. Since the rea­son for the inter­rup­tion will be irre­le­vant in the future this will pro­bably result in an inc­rease in the num­ber of vaca­tion requ­ests for periods lon­ger than four weeks.

The new tra­vel expense law regar­ding taxes seems to be ano­ther proof that a sim­p­li­fi­ca­tion of Ger­man tax law is near impos­si­ble to achieve. Things that may sound simple and plau­si­ble on paper often turn out to be an aggra­va­tion in dis­guise due to the inter­ac­tion of several regu­la­ti­ons as well as the expen­di­ture of time in connec­tion with the assign­ment, con­trol and cer­ti­fi­ca­tion pro­cess.

Short sum­mary of new tax tra­vel expense law

The chan­ges that have been made to the law on tra­vel expen­ses, which also apply to income-rela­ted expen­ses, are equally app­lica­ble to busi­ness expense deduc­ti­ons for income from com­mer­cial acti­vi­ties and self-emp­loy­ment.

Defini­tion of a “pri­mary work­place”

The legal term “re­gu­lar work­place,” which was never defi­ned, has now been replaced by “pri­mary work­place” and is expressly defi­ned in the law. The pri­mary work­place is a fixed faci­lity of the emp­loyer, an affi­lia­ted com­pany, or in excep­tio­nal cases a thirdy party spe­ci­fied by the emp­loyer to which the emp­loyee has been per­ma­nently assig­ned.

Trans­por­ta­tion costs

The flat rate for dis­tance tra­ve­led has now been defini­ti­vely regu­la­ted so that trans­por­ta­tion costs for busi­ness trips (not trips bet­ween a tem­porary living place and a pri­mary work­place or trips to family resi­den­ces) can be deter­mi­ned by trea­ting the actual costs as income-rela­ted expen­ses, or alter­na­ti­vely by using the flat rate per kilo­me­ter already in force (EUR 0.30 by car) pur­su­ant to the Federal Tra­vel Expen­ses Act.

Addi­tio­nal expen­ses for meals

The mini­mum amo­unt of time on the road in order to qua­lify for the flat rate for addi­tio­nal meal expen­ses has been dec­rea­sed, and the three-tie­red scale in force until now has been replaced by a two-tie­red scale of flat fees, set at EUR 12 and EUR 24. As before, the flat rate app­lies only to emp­loyees who have been wor­king at a single work­place for less than three months. Any inter­rup­tion in an emp­loyee’s work at a spe­ci­fic work­place for 4 weeks or more cau­ses the three-month period to start over. If an emp­loyer or any third party desi­g­na­ted by the emp­loyer pays for a meal, the flat rate will typi­cally be redu­ced by 20% for a bre­ak­fast and 40% for a lunch or din­ner from what it would have been for a full 24-hour period.

Dou­ble resi­den­ces

In cases where emp­loyees are requi­red to main­tain two places of resi­dence, the typi­cal cost of local rent will not be the deter­mi­ning fac­tor. Ins­tead, an upper limit of EUR 1,000 per month has been set until the emp­loyee’s actual cost of rent can be deter­mi­ned.

Lod­ging expen­ses

Lod­ging expen­ses during assign­ments out­side of the pri­mary work­place can be deduc­ted as income-rela­ted expen­ses wit­hout res­tric­tion for up to 48 months. At the end of this time period (for long-term out-of-office assign­ments), expen­ses may not be trea­ted any dif­fer­ently than they would be in cases of dou­ble resi­den­ces – which means no more than EUR 1,000 per calen­dar month.

Meals payed for by emp­loy­ers

Regu­lar meals cos­ting no more than EUR 60 that an emp­loyer pro­vi­des for his emp­loyees because of an out-of-office assign­ment are to be asses­sed in the future at their actual value.

Vali­dity period of emp­loyee with­hol­ding tax exemp­tion

For the sake of admi­ni­s­t­ra­tive sim­p­li­city, exemp­ti­ons for emp­loyee with­hol­ding tax pur­po­ses can­not be allo­wed for any lon­ger than a period of two calen­dar years from the begin­ning of the first calen­dar year when the exemp­tion took effect.