Wage TaxNovember 2013
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New German tax regulations to apply to expenses incurred in
con-nection with work-related travel as of 2014 - “primary place of work”According to the Law on the Modification and Simplification of Company Taxation and Travel Expenses 2014 significant changes have been made to the tax rules on work-related travel expenses. The replacement of the concept of an employee's “regular place of work” ("regelmäßige Arbeitsstätte") by the concept of a “primary place of work” ("erste Tätigkeitsstätte") is the corner-stone of the amended regulations.
I. "Primary place of work"
The “primary place of work” can mean any fixed operative establishment ("ortsfeste betriebliche Einrichtung") of the employer, an affiliated company or a third party appointed by the employer, to whose establishment the employee has been permanently allocated. A permanent allocation should be particularly given in case the employee should be em-ployed at the same working place
- for the duration of the (limited or unlimited) working relationship or
- if the employee should work at a certain location for more than 48 months.
For the evaluation whether a permanent allocation is given an "Ex-ante" decision (focus-ing on the future) is required.
The decisive criterion for determining the allocation of the employee´s fixed operative es-tablishment by the employer, is the location specified by the employer (in accordance with his right of direction over the employee) in the employee's work contract or another doc-ument.
If a location is specified in the work contract or another document, there is no need to look at how much time the employee actually spends working there, in order to determine that employee's “primary place of work”.
Where an employer does not permanently allocate an employee to a fixed operative es-tablishment, that employer is required to anticipate how much time the employee will spend at a particular fixed operative establishment. The specified establishment will be deemed to be the “primary place of work”, as long as the employee performs his daily work there, or works there for a minimum of at least two full working days per week or for at least 1/3 of the working hours individually agreed upon.
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The previous rules looked at where the employee's central point of work interest was, which was generally where the employee performed the main part of his work. This aspect should no longer be of any relevance.
II. Travel Expenses
The rules currently applicable to travel expenses incurred in connection with business trips will continue to apply. The employer can reimburse any costs for job-related trips that are not trips between home and the "primary place of work" tax-free. Costs incurred by the use of public transportation can be refunded up to the actual amount paid. The taxa-ble base for trips made by the employee using a private car is a "per kilometer allowance" based on the total costs of car usage.
Alternatively, travel costs can still be reimbursed using a flat kilometer rate. The applica-ble rates are indicated in the respective "Bundesreisekostengesetz" (Federal Travel Ex-pense Act) and depend on the type of vehicle used. Currently, an amount of 0,30 € ap-plies per kilometer driven by car, and 0,20 € per kilometer driven using any other type of motor-based vehicle. Additional allowances for the job-related carriage of further passen-gers are not listed in the "Bundesreisekostengesetz" and cannot be refunded tax free (as per our current state of knowledge).
The current transportation regulations state that employees who do not have a "primary place of work" are entitled to reimbursement for all travel expenses, according to busi-ness trip regulations. This will continue to apply from 2014 onwards.
Previously, collection points (bus depots, habours, meeting points for employee group transportation) and so-called wide-range areas of work ("weiträumiges Tätigkeitsgebiet") were not seen as an establishment of the employer, so the employee was able to claim business expenses for the trip from home to such locations. The new rules have reversed this treatment, in that the trips from home to such locations are no longer deemed to be a business trip, but rather a trip from home to a work place. As such, any employee-reimbursements for travel expenses have to be taxed by the employer.
III. Standard Allowances
With regard to standard allowances the currently applicable three-step scale will be re-placed by a two-step scale. From 2014 onwards per diem allowances in connection with domestic business trips within Germany can be claimed tax-free up to 12 € (any excess reimbursements can be deducted as income-related expenses), if the absence from home and from the “primary place of work” lasts for at least 8 hours per calendar day. If the absence lasts for more than 24 hours per calendar day an standard allowance of 24 € will continue to apply. The allowance of 12 € can also be claimed for each day of arrival and departure, regardless of the exact duration of the business trip on those days.
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One-Day Business Trip:
Absence from home and from "primary place of work" on calendar day 8 to 24 hours: 12 €
Business Trip for several workdays including an overnight stay:
- Day of arrival/departure on calendar day - regardless of the duration 12 €
- for > 24 hours 24 €
The employee starts his three-day business trip on day one from his "primary place of work" and spends two nights on business at a different location. On day three he returns home. The standard allowances he can claim as of 2014 are as follows:
First Day/Arrival: 12 € (regardless of the duration)
Second Day: 24 €
Third Day/Departure: 12 € (regardless of the duration)
Total: 48 €
From 2014 the standard per diem allowances will be reduced by the value of meals granted to the employee by his employer (or: by a third party at the request of his em-ployer) during a business trip.
A meal is granted to the employee by the employer if the following prerequisites are met: - according to employment regulations or laws the meals during business travels have
to be reimbursed by the employer (i.e. respective regulation in the company´s travel expense guideline) and
- the invoice is issued to the employer or
- the invoice is a so-called small-value-invoice of not more then EUR 150 which does not contain the address of the recipient and the respective original of the invoice has been handed over to the employer
In case of meals granted to the employee by the employer, the standard per diem allow-ances are reduced by 20 % to account for breakfast, and by 40 % to account for lunch and dinner, which can be claimed for an absence of 24 hours per calendar day. For ex-ample, an employee enjoying a hotel breakfast in Germany during a business trip is enti-tled to the standard allowances of 12 € for the arrival day, 24 € less the benefit of break-fast at 4,80 € the next day, and less a further 9,60 € for lunch/dinner (each).
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The employee is on a three-day business trip. The employer has booked a hotel with two overnight stays for the employee, including breakfast, lunch for both days and dinner for the second day. All meals have a value of < 60 €. The employer would like to refund the standard allowances.
The employer can refund the following reduced standard allowances:
Allowance Reduction Tax-free portion First Day/Arrival Day: 12 € 0 € 12 € Second Day: 24 € 24 €1 0,00 € Third Day/Departure: 12 € 12 €2 0,00 €
Total tax-free: 12 €
If the employee has to pay anything for the provided meals this payment will minimize the reduction imposed.
If the employee is only able to claim a reduced standard per diem allowance, the value of the meal does not have to be taxed as a benefit in kind as far as the meal could be re-garded as “usual”. The cost-estimate for usual meals consumed during a business trip has been increased to 60 € (incl. VAT) instead of the currently applicable 40 € per meal. If the employee receives a meal that is deemed to be usual and if he is not entitled to claim reduced standard per diem allowances (e. g. his absence for the business trip does not exceed 8 hours within one day) the official amounts for benefits in kind (“amtlicher Sachbezugswert”) will be taxed as salary (values for 2014: 1,63 € for breakfast and 3,00 € for lunch/dinner). In this respect a flat tax rate of 25 % can be applied.
If the meal exceeds 60 €, it has to be taxed at its real value. The employee can claim full standard allowance as income-related expenses in his income tax return. The employer can also tax refund the standard allowance to the employee (without reduction).
The employee is on a two-day business trip, including an overnight stay. The employer refunds the full costs upon submission of original receipts. The employee submits the fol-lowing documents:
- dinner on the day of arrival: 35 €, - breakfast at the hotel: 18 € and
- costs for a midday meal on day of departure: 125 € (with participation of a business partner)
1 4,80 € for breakfast, 9,60 € (each) for lunch and dinner
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Dinner and breakfast generally have to be valued using the official benefit in kind values ("amtlicher Sachbezugswert") as the meal not exceeds 60 € (each). However, because the employee is entitled to claim a tax-free (reduced) standard allowance, these do not have to be taxed. If an employee participates in a meal organized for business partners3 ("Geschäftsfreundebewirtung"), this will still not lead to a taxable benefit for the employee, however, in respect to the income-related expenses of the employee the standard allow-ance has to be reduced.
The total tax-free reimbursement to the employee amounts to EUR 178. Additionally, the employer can pay to the employee the following reduced allowances or alternatively the employee can deduct the following income-related expenses in his individual tax return:
Allowance Reduction Income-related expenses
Day of arrival: 12 € 9,60 € 2,40 €
Day of departure: 12 € 12 €4 0,00 €
Income-related expenses: 2,40 €
To date, standard allowances can only be claimed tax-free for the first 3 months of a business trip. The 3 month-limit will be retained in 2014. However, the 3 month-limit has been simplified as far as interruptions for work-related reasons are no longer required in order to restart the time limit. From 2014 onwards each interruption (e. g. holiday, sick-ness), regardless of the reason for the interruption, will be relevant, assuming that the in-terruption lasts for longer than 4 weeks.
3 The "60 €-range" will not be applicable in terms of meals organized for business partners
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The above information is intended to provide general guidance with respect to the subject matter. This general guidance should not be relied on as a basis for undertaking any transaction or business decision, but rather the advice of a qualified tax consult-ant should be obtained based on a taxpayer’s individual circumstances. Although our articles are carefully reviewed, we accept no responsibility in the event of any inaccuracy or omission. For further information please refer to the authors.