Small business employees in Germany spend time on the road because they must. When you’re establishing your business, face-to-face contact with clients and partners in other places is more impactful. Travel expenses are part of daily business, and they can add up in a hurry.
Accounting for travel expenses can be complex and sluggish. It’s made even more cumbersome by regulations and policies on employees’ travel compensation and reimbursement. Here’s a quick guide to some of the more peculiar specifics of expensing for travel in Germany.
What Types of Travel Expenses Are There in Germany?
Business travel and expense accounting in Germany breaks down into two main categories:
Per Diem Expenses
Per diem allowance is the sum an employee receives for living expenses in travel. These expenses are for basic life necessities. Limits on per diem expenses are set by the German government.
In Germany, companies are permitted to reimburse employees €0.30 per kilometre for fuel costs when traveling by car. Payments above that rate are subject to taxation.
What Are Per Diem Expenses?
The per diem allowance is a set daily amount to cover an employee’s daily discretionary spending while traveling on business. Since the company pays the allowance directly to the employee, there’s no legal requirement that they keep receipts on per diem expenses.
What Do Per Diem Expenses Cover?
When it comes to per diem, Germany is a little more complicated and restrictive than other nations. The allowance primarily covers accommodations, entertainment, and meals.
Most German companies pay for hotel stays straight from their budget, so accommodations are customarily not covered by per diems.
Entertainment per diem is subject to very strict conditions. For example, a company can’t reimburse the employee just for entertaining themselves, or outings with other company employees — there must be a third party involved. There are also firm requirements about documentation for entertainment, including the name of all parties involves and the reason entertainment was needed.
So, for practical purposes, per diem in Germany is primarily for food the employee buys on their own.
What Are the Per Diem Limits in Germany?
There are two sets of per diem limits for Germany: one for domestic travel and one for foreign visits.
Domestic limits are clear, but still tricky because they’re based on travel length. The trip must last at least 8 hours to qualify for per diem compensation. After that, the per diem limit is €14 if the trip lasts only a single day. For multi-day trips, the per diem limit is €28 for every 24 hours the employee is away from home, and €14 for days of arrival and departure.
Foreign trips are where per diem law in Germany gets really complicated. These regulations are based on the cost of living in the country visited, and that amount varies year to year. Per diem expenses for foreign travel are subject to the same day-length regulations as domestic trips.
We’re not quite done yet. If the employee has a free or expensed meal on the trip, such as a free hotel breakfast, then their per diem is reduced— 20% for a free breakfast, 40% for a free lunch or dinner.
In the very rare instance when a hotel isn’t covered by the employer, the per diem limit for overnight stays is €20.
It’s prohibitively difficult to keep up with the formulas and limits in calculating per diem — and the rates are always subject to annual changes. The Monite financial platform automates and organizes per diem expenses easily and quickly.
What Are Mileage Expenses in Germany?
Fortunately, car mileage reimbursement is far less complicated in Germany — so simple that we’ve already explained it above. It’s €0.30 per kilometre, if you’ve forgotten already.
To get tax-free reimbursements, the employee must document each route they take on their trip and provide evidence that it was the quickest way to get to the business destinations on their trip.
Although the policy is straightforward, mileage expense reports need to be entered on tax-compliant documents in Germany. These forms are fully integrated into Monite’s financial software, so mileage reports are effortless.
Some companies find it preferable to let employees expense car maintenance and gas costs, rather than submit for mileage reimbursements. This can have favourable tax implications for both parties. The employee can expense repairs and fuel costs by uploading their receipts — something else Monite does easily.
The Bottom Line
Per diem and mileage reimbursement help small business employees take the edge off being away from home. The Modite financial platform takes the strain and struggles out of paying for travel. Logging and expensing are up to 5 times faster with Modite software. Contact us to find out more.