Deductible expenses for work-related second household

Expatriates who start working in Germany may keep the main household in their home country. This is especially the case if the family stays back home. This situation results in two households and leads to the question: Are the expenses for the German household deductible?

Employees can deduct costs connected to having two households from their taxable income if these costs are work-related. Alternatively, the employer may reimburse those expenses free of tax. If legal criteria for a double household are not met, costs for travelling and accommodation can be deducted in accordance with other rules, if work-related.

A double household is work-related if an employee

• has his (main) household at one place,
• is working at another place and
• lives at the place of occupation.

An employee has the main household where his centre of life is. Regulary a married person has his centre of life where the spouse and the family stay. However, a single person can also have a double household if he keeps his centre of life at the home town. An employee keeps a centre of life in his home town if he stays there on a regular basis, if not working away or being on holidays.

Expenses for privately motivated double households are not tax-deductible. If an employer reimburses such expenses, the remunerations are subject to wage tax and social security contributions.

The following expenses are deductible or can be reimbursed by the employer:

Housing costs at place of occupation

The costs for a house or flat at the place of occupation or work are deductible. These are rents, associated costs, utility costs etc.

Costs can be deducted at full scale if the flat comprises of no more than 60 square meters. If the house or flat at the place of occupation/work measures more than 60 square meters, costs can only be deducted on a proportionate basis. 

Travelling expenses for going home

Travelling costs for one trip home per week are deductable with € 0.30 per kilometre for the distance between household and place of occupation. This means that in reality only € 0.15 for traveling there and back can be deducted. Alternatively, real costs for flights or trains can be deducted or reimbursed.

Daily allowance for costs of meals

In the first three months of being absent from his own household, the employee can deduct the following amounts:

• absence of at least 24 hours: € 24
• absence of at least 14 hours: € 12
• absence of at least 8 hours:   € 8

Relocation expenses

Relocation expenses can be deductible if certain criteria are met. See also here.

Work-related trips

If there is a work-related temporary absence from home (business trip), the following expenses are deductible or reimbursable:

• accommodation (for example hotel)
• travelling costs with € 0.30 per travelled kilometre (for both going and returning)
• daily allowance for costs of meals

Foreign Employees

Foreign employees can deduct costs for double household for tax purposes. However, there are certain restrictions.

• If the home abroad is kept and the family remains abroad, the employee has to travel home at least a few times a year. How often he travels home depends on how distant the home country is. In Europe there should be at least six trips home per year. To further destinations such as Australia, India or other long distance destinations, one trip home per year might be sufficient.
• Singles or employees bringing their families to Germany might have much bigger problems to prove that their centre of life remains abroad. However, these employees might be able to deduct the above mentioned travelling expenses for the first months of their stay in Germany.

Taxation of employer 

Reimbursed expenses for double households are deductible as business expenses, regardless of the fact whether reimbursements have been tax exempt or not.

The employer has to prove that the legal requirements of a double household are met. He has to document this. Singles or married employees bringing their families to Germany should at least give written confirmation that they keep up a household in their home town or home country which is the centre of life.

The employer can credit input-VAT against his own VAT if

• actual costs have been reimbursed
• invoices can be presented which are in line with legal requirements and
• invoices show the employer as the recipient of the service and German VAT is shown on the invoice.

Foreign VAT might be refundable abroad.

Glossary

Author: Peter Scheller, German Tax Adviser – Master of International Taxation

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