Expenses in Germany: Everything you Need to Know About the Legal Situation, Digital Expense Reports & Important Tips

Costs incurred in the course of business trips are referred to as expenses or travel expenses. In most cases, these are initially paid by the business travelers themselves and can be reclaimed after the business trip with an expense report or claimed in the tax return.

In this article, we have summarized the most important information on the topic of “expenses” for you.

Please note: The topic of travel expenses is associated with a large number of special regulations and exceptions. This article is intended solely as a guide and does not claim to be exhaustive. To ensure that your information is correct and complete, we recommend that you consult a tax advisor.

What is an Expense Report?

Whether hotel costs, train tickets or lunch – a business trip is always associated with costs. Employees and self-employed persons can claim these expenses back by submitting an expense report so that they do not have to be paid privately.

A correct expense report is also important for employers: the expenses incurred can be booked as business expenses, which reduces the company’s tax burden. If the expenses are not reimbursed by the company, employees can claim them as income-related expenses in their tax return.

In principle, an expense report may only include those expenses that the business traveler has incurred with their own funds during a business stay away from the first place of work. These are divided into four categories:

The Difference Between Expenses and Other Travel Expenses

The term “expenses” is often used as a generic term for the above-mentioned categories. Strictly speaking, however, only expenses for meals, food and drinks count as expenses. These costs are also referred to as additional meal expenses. This is calculated as a lump sum depending on the duration and location of the stay. We explain exactly how this works below.

All travel expenses incurred in connection with your business trip are referred to as travel expenses. Expenses for public transportation (plane, bus, train) are reimbursed by your employer upon presentation of receipts.

If you travel with your private vehicle, there are two methods for calculating travel expenses – the travel allowance and the mileage rate. With the flat-rate travel allowance, you can claim 30 cents per kilometer driven for cars and 20 cents for motorcycles.

Although the mileage allowance involves more effort, higher amounts are often reimbursed. To do this, you must keep a logbook of the kilometers driven on business and all costs for your vehicle (taxes, insurance, fuel, etc.) over a whole year.

Accommodation costs include expenses for accommodation (e.g. hotel, guesthouse, etc.). Although there is a flat-rate accommodation allowance for business trips in Germany, this only amounts to €20.00. It is therefore advisable to claim the actual costs, for which an original receipt must always be submitted.

Additional travel expenses include all expenses that do not fall into any of the aforementioned categories but were nevertheless incurred during the business trip. These include, for example, tickets for business events, cab fares or costs for Internet access.

Who Can Claim Expenses?

Travelers who take a trip for professional reasons and are therefore not at their usual place of work and/or cannot stay overnight at their place of residence can claim expenses. This applies to employees, freelancers and self-employed persons.

Legal Situation and Tax Regulations for Expenses in Germany

The tax office likes to check expense claims in particular. You should therefore take special care here, as payment may be refused if the expense report is excessive or incorrect. It is therefore important to find out about the current expense rates, company guidelines and tax regulations in advance.

Expenses allowance and expense rates

As mentioned above, in addition to travel and hotel costs, there are also costs for food and drink – additional meal expenses. This is calculated as a lump sum, so no receipts need to be submitted. It should be noted that this lump sum does not cover the entire cost of meals, as this is an additional expense. Costs that would also be incurred at home (such as the daily lunch) are therefore not fully covered.

Employees are entitled to additional meal expenses if they are away from their first place of work for more than 8 hours for professional reasons or cannot stay overnight at their own place of residence. The additional expense is paid out in the form of a lump sum for expenses or meals. The following expense rates apply within Germany for 2024

Small expense allowance: € 14.00 per day for a stay of between 8 and 24 hours
Large expense allowance: € 28.00 per day for a stay of more than 24 hours

Originally, as part of the Growth Opportunities Act, the lump sums for 2024 were to be increased to €16.00 for the half-day lump sum and €32.00 for the full-day lump sum. However, as the Bundesrat has refused to give its approval, the above-mentioned amounts still apply for trips within Germany.

It should also be noted that the expense allowance will be reduced if a meal is provided by a third party (e.g. breakfast included in the hotel price). The following applies:

Breakfast: -20% of the all-day flat rate (currently €5.60 in Germany)
Lunch and dinner: -40% of the all-day flat rate (currently €11.2 in Germany)

For business trips abroad, other expense rates apply for the most part. These are determined by the Federal Ministry of Finance (BMF). A list of the current expense rates for over 180 countries can be found here. The amounts are reviewed annually by the BMF and adjusted accordingly.

Expenses and tax return

If the expenses are reimbursed by the employer, the reimbursement is tax-free for the employee. Nevertheless, the expense report should be enclosed with the tax return. If the company refuses the reimbursement, employees can claim the expenses as income-related expenses in their tax return. The allowance for income-related expenses (also known as the employee lump sum) is €1,230.00 for 2024.

Self-employed persons, entrepreneurs and freelancers also have the option of declaring expenses as operating costs in the income statement (EÜR) or in the profit and loss account (P&L).

For a correct expense report, all expenses must be fully documented. Costs are only reimbursed if the corresponding receipts and invoices can be submitted. This is primarily intended to prevent excessive expense claims. Incorrect expense claims are also a valid reason for termination without notice. Entrepreneurs must keep expense or travel expense reports for 10 years.

The three-month period applies to the payment of expenses. If your stay lasts longer than 3 months, other legal regulations apply.

A digital expense report creates good conditions for smooth financial processes in a company. Timely submission of expense reports is not only important for the finance department (e.g. for monthly financial statements and advance VAT returns), but of course also for employees. Expenses can only be reimbursed if the expense report is correct and can be processed quickly. By digitizing work processes, you not only save time and money, you also relieve your employees and protect the environment.

Conclusion: How to Master Your Expense Report in Germany

If you are going on a business trip, find out about the current company guidelines and tax laws on expense claims. Bear in mind the differences between a flat-rate expense report and one based on actual costs. As long as all your expense report details are correct and complete (including all receipts), no problems should arise.

Well-designed software solutions can be a great help with financial processes. If you would like to process your expense report digitally, our digital expense report solution can help you.