(2022)
Can the costs for the postdoctoral qualification celebration be deducted as business expenses?
Expenditure on hospitality for personal events is usually not tax-deductible. Such events include work anniversaries, promotions, birthdays, and also the awarding of an honorary doctorate or a habilitation celebration. In this case, the hospitality costs serve personal representation and are therefore privately motivated and not deductible as business expenses. These are "expenses for lifestyle that arise from one's economic or social status, even if they promote one's profession or activity" (Section 12 No. 1 EStG).
Recently, the Saxony Finance Court ruled that a doctor's hospitality costs for his habilitation were not deductible as business expenses. The judges did not consider the celebration to be a professionally motivated event based on the overall circumstances. The decisive factors were that the celebration was not held on the employer's premises, had no impact on the doctor's fixed salary, and took place on his private initiative with a guest list he selected himself (FG Sachsen, 15.4.2015, 2 K 542/11).
Currently, the Federal Finance Court has overturned the Saxony Finance Court's ruling and emphasised that hospitality costs for a habilitation can indeed be business expenses. It is incorrect to view the habilitation as more of a private than a professional event. The habilitation is a university examination that recognises a special qualification for research and teaching in a specific professional field.
The habilitation thus demonstrates a special scientific ability in a specific professional area, which includes the right to teach. The predominantly professional nature of acquiring this special qualification cannot be denied, even though the habilitation is also a personal event in the claimant's life (BFH ruling of 18.8.2016, VI R 52/15).
- Whether the hospitality costs are professionally or privately motivated primarily depends on the occasion of the celebration. However, the occasion is only a significant indication. Despite a prominent personal event, other circumstances of the individual case may indicate that the expenses for the celebration are professionally motivated. Conversely, an event in the professional sphere alone does not justify the assumption that the expenses for a celebration are almost exclusively professionally motivated.
- Whether the hospitality costs are professionally or privately motivated also depends on the circle of invited colleagues: If colleagues are invited because of their affiliation to a specific business unit (e.g. all employees of a department) or based on their function within the company (e.g. all sales staff or trainees), this indicates a professional motivation. However, if only selected colleagues are invited, this may suggest a significant private motivation, and a deduction as business expenses may therefore be excluded.
- Whether the hospitality costs are actually business expenses is also to be assessed based on further criteria: It is important who acts as the host, who determines the guest list, whether the guests are colleagues, business friends or employees (of the employee or the employer), public figures, press representatives, association representatives, or private acquaintances or relatives of the host. It is also important to consider where the event takes place, whether the financial expenses are in line with comparable business events, and whether the event has the character of a private celebration or not.
If expenses for the celebration are of mixed motivation, because both private and professional guests attended, the total costs must be apportioned according to the guests. The costs attributable to each guest must be allocated either entirely to the professional or the private sphere.
The expenses for snacks, champagne, wine, etc. are fully deductible as business expenses. They are not limited to 70% as is the case for self-employed individuals (according to Section 9 Para. 5 EStG in conjunction with Section 4 Para. 5 No. 2 EStG). This also means that the strict proof requirements using formal hospitality receipts do not apply. The catering service invoice or corresponding purchase receipts are sufficient (BFH ruling of 20.1.2016, VI R 24/15).
