(2023)
Can the costs for the postdoctoral qualification celebration be deducted as business expenses?
Expenditure on hospitality for personal events is generally not tax-deductible. Such events include work anniversaries, promotions, birthdays, and also the awarding of an honorary doctorate or a habilitation celebration. In these cases, the hospitality costs serve personal representation and are therefore privately motivated and not deductible as business expenses. They are considered "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 expenses for his habilitation were not deductible as business expenses. The judges did not consider the event to be professionally motivated based on the overall circumstances. The decisive factors were that the event was not held on the employer's premises, had no impact on the doctor's fixed salary, and was organised privately with a guest list chosen by him (FG Sachsen, 15.4.2015, 2 K 542/11).
Currently, the Federal Finance Court has overturned the Saxony Finance Court's decision and emphasised that hospitality expenses 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 aptitude for research and teaching in a specific professional field.
The habilitation thus demonstrates a special scientific qualification in a specific professional area, which includes the right to teach. Regardless of the fact that the habilitation is also a personal event in the claimant's life, its predominantly professional character cannot be denied (BFH ruling of 18.8.2016, VI R 52/15).
- Whether the hospitality expenses are professionally or privately motivated primarily depends on the occasion of the event. 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 event are professionally motivated. Conversely, an event in the professional sphere alone does not justify the assumption that the expenses for an event are almost exclusively professionally motivated.
- Whether the hospitality expenses are professionally or privately motivated also depends on the group of invited colleagues: If colleagues are invited because of their affiliation to a specific company 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 expenses are actually business expenses must also 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 associates, or employees (of the employee or 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 company events, and whether the event has the character of a private celebration or not.
If expenses for the event 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 fully allocated to either the professional or 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 with 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).
