(2023)
What should I know about the new 48-month limit?
For off-site work, travel, accommodation, and incidental travel expenses, as well as meal allowances, can be deducted as business expenses.
Since 2014, a new 48-month limit has played a significant role.
(1) The 48-month limit in determining the first place of work
"First place of work" is a fixed workplace of the employer to which the employee is permanently assigned. Even without an explicit designation by the employer, a permanent assignment is assumed if the employee is to work at a location for an extended period. This is the case for employment
- indefinitely ("until further notice"),
- for the entire duration of the employment contract (fixed-term or indefinite) or
- for a period of more than 48 months.
TIP: This means: All assignments (transfers, secondments, postings) that are initially limited to a maximum of 48 months do not constitute a "first place of work" but rather off-site work. Therefore, travel costs can be deducted with the business travel allowance or the actual costs, as well as meal allowances and accommodation costs, as business expenses or reimbursed tax-free by the employer.
(2) The 48-month limit for work at a customer's premises
Unlike in the past, an employee can now have their "first place of work" at a customer's premises of their employer, but only for long-term work. This applies, for example, to employees who work on a long-term project at the customer's site or temporary workers who work for the borrower without a time limit.
Such long-term work exists if the employee works at a customer's premises or a related company
- from the outset for more than 48 months or
- for the duration of the employment contract.
(3) The 48-month limit for accommodation costs
For overnight stays during off-site work, only the actual costs can be deducted as business expenses or operating costs. Since 2014, accommodation costs can only be deducted in full or reimbursed tax-free by the employer for a period of 48 months.
From the 49th month, the deduction of business expenses or tax-free reimbursement is limited to comparable expenses for double housekeeping, i.e. to a maximum of 1.000 Euro per month. This limit only applies to off-site work in Germany, not abroad.
The 48-month period starts anew if the work at the same place of work is interrupted for at least 6 months. The reason for the interruption (e.g. illness, holiday, work at another place of work) does not matter.
The Münster Finance Court has recently confirmed the tax authorities' view and ruled that repeatedly limited assignments to a construction site of less than 48 months each do not establish a "first place of work" there, even if the assignment lasts continuously for more than four years (Münster Finance Court, 25.3.2019, 1 K 447/16).
Special case for temporary workers:
Temporary workers are not in an employment relationship with the company where they are deployed, but with "their" temporary employment agency, often referred to as the "lender". If these employees are "loaned" to a specific company for a certain period, the question arises whether they can deduct their travel to the place of work according to travel expense principles (30 cents per kilometre travelled) or only with the lower commuting allowance (30 cents per kilometre of distance).
In principle, travel costs can only be claimed with the commuting allowance if the temporary worker is permanently assigned to a place of work. This is the case if they are to work there for an extended period, namely
- indefinitely ("until further notice"),
- for the duration of the employment contract or
- for a period of more than 48 months.
This means: Temporary workers can also have their "first place of work" at the customer's site if they work there for an extended period. However, this is only the case if the employee is to work there from the outset (!) for more than 48 months or for the duration of the employment contract or indefinitely. Travel can then only be deducted with the commuting allowance, and meal allowances and incidental travel expenses are not taken into account. Temporary workers who work at customers' premises for a shorter period, however, are engaged in off-site work and can therefore claim their travel with the business travel allowance - and to a certain extent also meal allowances.
The Lower Saxony Finance Court recently ruled that an employee in a permanent employment relationship with a temporary employment agency can only claim travel costs with the commuting allowance for their journeys between home and place of work, even if the temporary employment agency has agreed on a fixed term for the work with the respective borrower of the employee (judgment of 28.5.2020, 1 K 382/16).
However, the Federal Fiscal Court overturned the judgment (Federal Fiscal Court judgment of 12.5.2022, VI R 32/20). According to this, the relevant employment relationship for the question of whether the employee is permanently assigned to a company facility within the meaning of Section 9 (4) sentences 1 to 3 of the Income Tax Act is the employment relationship between the employer (lender) and the (temporary) employee. If the employee's assignment to the borrower consists of repeated but fixed-term assignments, there is no permanent assignment.
In its judgment of 10.4.2019 (VI R 6/17), the Federal Fiscal Court stated that the existence of a fixed-term temporary employment relationship does not preclude the assumption of a permanent assignment. However, it did not have to decide the case specifically, as in the case at hand, the employee was assigned to two different places of work one after the other during their employment. This was not the case in the current situation, as the claimant was in fact only employed by company B and was also specifically hired for this by the temporary employment agency. In any case, the Federal Fiscal Court is now involved again, as the appeal is pending (Ref. VI R 32/20). Affected temporary workers should therefore appeal against negative tax assessments and request that their own proceedings be suspended.
