Author: Jana Grünewald, Berlin
Professional travel is always associated with additional costs. Self-employed artists and creatives who work in different locations must always take into account possible travel expenses. If the artist or creative bears the travel expenses himself/herself, he/she can claim them as a tax deduction, provided that they were incurred during an almost exclusively professional absence (Richtlinie R 9.4 zu § 9 EStG). Absence is defined as the absence from both the home and regular workplace(s). The following applies to self-employed persons: Travel expenses are listed in the tax return as business expenses.
Tax-deductible expenses include travel expenses, additional meal allowances, accommodation allowances, and incidental travel expenses.
Travel expenses include the expenses of round-trip travel and trips at the destination. The costs for the use of public transport (such as airplane, train, ship, and local transport) or a rental car can be claimed at the actual amount.
When using an individual’s personal car, the type of deduction depends on the share of business use.
If the vehicle is used for business purposes less than 50% of the time and thus qualifies as a necessary personal asset, there are two possible types of deduction. The travel expenses can either be determined based on a flat rate per kilometer (stipulated by the Federal Ministry of Finance) or using an individual rate for kilometer. The latter includes the total annual costs related to the vehicle and the professional mileage is established by means of credible evidence (e.g., a driver’s logbook). These options apply even if the artist or creative is not the owner of the vehicle.
Other regulations apply if the vehicle is used for business purposes more than 50% of the time and the artist or creative owns it, as it is then considered a so-called necessary business asset. All expenses related to the vehicle are recorded as business expenses, thus reducing the overall profit when determining taxable income. The personal, non-tax deductible share of use increases the profit and can be determined in two ways: Either the total annual costs related to the vehicle are determined and the actual amount of personal use is then reported based on a logbook, or one can apply the so-called 1% rule, in which the share of personal use is calculated at a fixed rate of 1% per month of the gross list price of the vehicle.
Trips usually result in spending more on food and drink. These additional expenses can be claimed for tax purposes based on the fixed allowances stipulated by the Einkommensteuergesetz (English: Income Tax Act; § 4 Abs. 5 Satz 1 Nr. 5 EStG). Applying these standard rates is mandatory; the costs that are actually incurred are not deductible. The per diem amount depends both on the duration of the trip (days and hours) and the country or countries to be visited.
The following per diems apply to business trips within Germany:
Absence here means the absence from both the home and the regular workplace.
Different per diems apply for business trips abroad, depending on the country visited. The Federal Ministry of Finance derives these international daily allowances from the Bundesreisekostengesetz (BRKG; English: Federal Travel Expenses Act) and updates them annually. The allowance is determined by the location that the traveler last reaches before midnight local time. For one-day trips abroad and return days to Germany, the amount of the per diem depends on the exact period of absence.
The following lists the current allowances for Chile and Norway as examples:
The current list of additional meal allowances can be found here. (Note: The standard accommodation allowances also listed here do not apply to self-employed individuals! See 'Accommodation allowance'.)
A German-based, self-employed musician flies to Norway to give a concert. He/She leaves his/her house on Friday at 7 am and returns on Sunday at 6 pm. He/She calculates the deductible meal allowances as follows: 53 euros (for Friday, 17 hour absence) + 80 euros (for Saturday, 24 hour absence) + 53 euros (for Sunday, 18 hour absence) = 186 euros.
Self-employed individuals can deduct actual hotel costs from their taxes as business expenses, provided that they are reasonable. Original receipts must be kept. The amount claimed for hotel costs must be reduced by the cost of any meals included. If the meal costs are not specifically noted in the hotel bill, fixed amounts are used: 20% of the full additional meal allowance must be deducted for breakfast, and 40% each must be deducted for lunch and/or dinner.
A sculptor stays in a hotel in Munich. Breakfast is included, but the cost is not listed on the hotel bill. Therefore, the sculptor deducts 20% of the full meal allowance for Germany of 24 euros from the deductible hotel costs; i.e. 4.80 euros.
Incidental travel expenses include various costs incurred during business trips; e.g., toll charges, parking fees, professional phone calls, luggage storage, changes and cancellations, etc. These are tax deductible if they can be documented with receipts.
Information regarding tax returns
Self-employed individuals can list their travel expenses as business expenses in Schedule EÜR – Einnahmenüberschussrechnung (English: income and expenditure statement). Additional meal allowances belong in line 50, additional travel expenses in line 47. (“Übrige unbeschränkt abziehbare Betriebsausgaben;” English: other unlimited deductible business expenses). They also must be itemized in an informal statement of profits.
Note for employers
Employers can reimburse their employees for travel expenses tax-free and outside the scope of social security, i.e. as business expenses that are eligible for tax deduction (§ 3 Nr. 16 EStG) – but only up to the statutory amounts. Supporting documents and receipts should be kept in order to demonstrate the nature and duration of a trip.