Are the costs for the postdoctoral qualification celebration tax-deductible as business expenses?
Expenses for hospitality on the occasion of personal events, such as work anniversaries, promotions, birthdays, or the awarding of an honorary doctorate, are generally not tax-deductible. Such costs are considered to be of a private nature and serve personal representation. Therefore, according to § 12 No. 1 EStG, they are not deductible as business expenses, even if they appear to be professionally beneficial.
Habilitation celebration: Professional or private?
A ruling by the Saxony Finance Court on 15 April 2015 (Ref: 2 K 542/11) rejected the deduction of a doctor's hospitality expenses on the occasion of his habilitation as business expenses, as the celebration did not take place in a business environment and was privately organised. However, this ruling was overturned by the Federal Finance Court (BFH) on 18 August 2016 (Ref: VI R 52/15). The BFH clarified that a habilitation is to be regarded as a professional event. The habilitation is a university examination that proves the ability to teach and research, and is therefore predominantly professionally motivated.
Criteria for the deductibility of hospitality expenses
Whether hospitality expenses are deductible as business expenses depends on various criteria:
- Occasion of the celebration: Professional events are more likely to be deductible. However, a personal event may also have professional connections.
- Guest list: If colleagues or people from the professional environment are invited, this is a strong indication of professional motivation. If selected private guests are invited, there is often a private co-motivation.
- Venue: A celebration in a business environment strengthens the professional motivation, while a celebration in a private setting is more likely to indicate a private event.
Mixed motivation
If both private and professional guests attend, the costs can be apportioned accordingly. The expenses for each guest are allocated to either the professional or private sphere.
Proof of hospitality expenses
Unlike self-employed individuals, who can only deduct 70% of hospitality expenses, employees can deduct the expenses in full as business expenses. There are no strict proof requirements: invoices from the caterer or purchase receipts are sufficient, a formal hospitality receipt is not required (BFH ruling of 20.1.2016, Ref: VI R 24/15).
