A critical issue (or the sudden outbreak of a pandemic) may lead business travelers to spend more time away from home than initially planned.
Because such trips are work related, employers are responsible for covering the traveler’s daily meals. They can do this either with regular receipt-base reimbursements, or by paying the traveler an allowance. In the latter case, it is important to note that allowances cannot be paid tax-free indefinitely and are limited to a three-month period.
Below we review the 3-month rule, exceptions, and how to manage compliance with this specificity of the German market.
Per diems (allowances) for daily expenses are only tax-free for up to three months of continuous travel at a given location.
Allowances for long stays of three months and more, in German law, are taxable. It is thus important to accurately record all details of business trips to ensure compliant per diem calculation.
Stays at a location lasting three days or more in a week are considered “long stays”. Every such stay at a single location is added until reaching three months, unless interrupted by 28 days or more of being away from said location.
Permanent assignments on mobile facilities such as aircraft, ships and other vehicles are exempt from this rule.
Assignments at different locations for a single employer will also be considered “long stays” if totaling over three months. The “Supplementary BMF letter on the 2014 travel expense reform” details how the 3-month rule is applied in case a traveler’s assignment location changes.
Any interruption of at least four weeks of a long stay restarts the clock on the three-month period. And this, regardless of the reason for said interruption.
One or two-day stays, even at the same location, do not trigger a 3-month period. An employee can work from an external location for two days a week over the course of nine months and still receive their daily allowance.
Germany regulates maximum per diem rates both for travel within the country and travel abroad and updates them every year. In 2021, the rates for travel within Germany are as follows:
14€ per day for business trips lasting eight to 24 hours. This rate applies for the departure and return days of multi-day trips. It also applies for trips with night work extending over two calendar days (the “midnight regulation”) and is allocated to the day with the longest absence.
28€ per day for trips lasting more than 24 hours.
No per diem for trips totaling under eight hours in a 24-hour period.
There are four ways to avoid falling under the 3-month rule:
Interrupting the business trip for more than four weeks (whether for work, holidays or an illness).
Carrying out activities for different customers in the same location during the trip.
Spending two days per week or less working at the external location.
Working on a mobile facility such as a ship.
The rules, rates and regulations that apply to German organisations are regularly updated in our solution by our Compliance Team. This ensures that entries made by your employees will always be compliant, avoiding miscalculations and saving you, and them, valuable time.
Creating compliant per diem claims is as easy as entering departure and return dates and a destination. Our up-to-date solution runs all the calculations for you based on the data from the BMF.
Try our mobile app for even easier and more flexible compliance.