Business travel and expense compliance is a complex topic anywhere, and especially in Germany. In this article, we bring together all aspects of German expense report compliance in hopes of making them easy to understand.
There are three key points to business travel and expense compliance in Germany:
Daily allowances (per diems)
GoBD reporting and control.
Daily Allowances (per diems)
In Germany, employees traveling for work for eight hours or more are entitled to daily allowances to cover their meals. This allowance is tax-free under certain conditions. The rates are fixed and depend on the destination (within Germany or abroad) and duration of travel, and are regulated by the Federal Ministry of Finance.
Daily allowance amounts in 2023
The logic is the same for travel both within and outside of Germany:
Trips under 8 hours: no allowance
Trips between 8 and 24 hours: reduced allowance rate of 14€ within Germany
Trips over 24 hours: standard allowance rate of 28€ within Germany.
NB: Travelers always receive a reduced allowance on the first and last day of multi-day trips, regardless of the duration of travel for that day.
Daily allowance deductions
Employees must apply deductions to their daily allowances for meals they have not paid for themselves. For example, if breakfast is included in their lodging cost (reimbursed by the employer) or if they are served lunch as part of an event, the deduction applies.
Regardless of the country, the following deductions apply:
20% for breakfast
40% for lunch
40% for dinner
The 3-month rule
Daily allowances are only tax-free for up to three months of continuous business travel in a given location. This is the “3-month rule” or “3-Monatsfrist”.
Any stay lasting more than three days in a week is considered a “long stay”. Any further stay at the same location extends the “long stay” if there are less than 28 days between each of these further stays.
Allowances for “long stays” of more than three months become taxable for the employee receiving them.
Mileage allowances in 2023
Employers can choose to reimburse their employees for using their own vehicle for work with mileage allowances.
The GoBD are the principles for the proper management and storage of books, records and documents in electronic form as well as for data access. They deal with the proper electronic storing of documentation and handling of tax relevant documents such as expenses.
The latest changes in the principles allow mobile scanning, digital storing (e-archiving) and the use of cloud systems for a paperless tax process.
The GoBD also alludes to the compliance requirements regarding data access and the auditability of digital documents by the German tax authorities. There are three tiers to this access, and the tax authority can decide which access they must be provided during an audit:
Z1 - Direct read-only access
Z2 - Indirect access
Z3 - Data carrier release / data media transfer.
BONUS: VAT recovery
Companies which correctly abide by the GoBD regulation can apply a fully paperless accounting and tax process, including foreign VAT recovery. They can choose to either submit their own recovery claims, or appoint a VAT reclaim partner to do it for them.
Some of the most commonly eligible expenses for VAT recovery include:
Conferences and events
With numerous customers active in Germany, Mobilexpense has mastered the country’s expense compliance requirements. Our Compliance Department actively monitors compliance updates from 70+ countries and updates the solution with the latest changes. From allowances to GoBD principles all the way to integrated VAT reclaim, we guarantee our customers peace of mind and hassle-free expensing.
Whether you are a German company or a multinational active in Germany, Mobilexpense has the right compliance solution for you.