Employees are generally reimbursed for expenses incurred for entertaining clients on behalf of their employer. However, this may differ if the employee receives performance-related payments.
As a general rule: Expenses incurred by an employee for entertaining guests on the occasion of a personal event (birthday, promotion, anniversary, etc.) are considered non-deductible private expenses according to established case law. The Federal Fiscal Court (BFH) has ruled that the occasion of the event should not be the sole determining factor; a comprehensive assessment should also consider other circumstances (judgment of 11 January 2007 VI R 52/03).
For the professional or private nature of the entertainment expenses, it is also important to consider, for example, where the event takes place, who acts as host, who determines the guest list, and whether the guests are colleagues, business associates, press representatives, or private acquaintances or relatives of the taxpayer.
Thus, the BFH applies criteria for expenses that it has developed for distinguishing between taxable wages and benefits in the employer's operational interest on the income side.
Electronic cash registers
Electronic cash registers are subject to special recording and security requirements to prevent manipulation. The Cash Register Security Ordinance requires that issued receipts must contain transaction and serial numbers of the electronic recording system or the security module. The transitional regulation expired on 31 December 2022.
As the new security features are mandatory, customers should ensure that restaurant bills contain the required information, possibly in the form of a QR code.
If the restaurant does not have an electronic cash register, the Berlin-Brandenburg Fiscal Court ruled that handwritten invoices are sufficient as entertainment bills and are 70 percent deductible (FG Berlin-Brandenburg, 8 November 2021, 16 K 11381/18).
Note: Trust is good, control is better. Ensure you receive the final receipt, as only this will be recognised by the tax office.
(2023): How to claim hospitality expenses as income-related expenses for tax purposes!
Are occupational insurance policies considered income-related expenses?
The maximum amount for special expenses is usually already exhausted by other insurance policies. For this reason, it is advisable to claim all work-related insurance not covered by the employer as income-related expenses.
In practice, a deduction in the area of income-related expenses is mainly possible for liability, accident, and legal expenses insurance (possibly proportionately).
(2023): Are occupational insurance policies considered income-related expenses?
Can I claim legal fees in my tax return?
Legal fees incurred in connection with earning income can be claimed as income-related expenses in the tax return.
Two examples:
- If, for example, an employee takes legal action against their dismissal, the legal fees are considered income-related expenses for income from employment.
- If the owner of a rented property takes legal action against a tenant for not leaving the property in proper condition, these costs are deductible as income-related expenses for income from renting and leasing.
There are no income-related expenses if the costs for the legal dispute or lawyer are reimbursed by legal expenses insurance.
(2023): Can I claim legal fees in my tax return?
How is the winter employment levy taken into account?
Employees in the construction industry are entitled to seasonal short-time work benefits during the bad weather period. Eligible employees include those from businesses in the construction industry, scaffolding trade, roofing trade, and landscaping. In addition to seasonal short-time work benefits, commercial employees may receive additional benefits under collective agreements, such as the winter allowance and the winter expense allowance. These additional benefits are financed through a levy (known as the winter employment levy).
Employee contributions to the winter employment levy are deductible as income-related expenses. This is because the levy is calculated from taxable and social security liable wages and deducted from net wages. Generally, the employer has listed them separately in the income tax statement. Enter these amounts in "Anlage N" under other income-related expenses.
(2023): How is the winter employment levy taken into account?
