Peter Scheller
Berater für Wirtschaftsprüfer, Rechtsanwälte, Steuer- und Unternehmensberater

„Wenn es knifflig wird.“

Deductible relocation expenses in Germany

von Peter Scheller

Deductible relocation expenses in Germany

Employees can deduct relocation expenses from their taxable income if these costs are job or work-related. Alternatively, the employer may reimburse those expenses free of tax. If the employer does not reimburse all relocation expenses, the employee is entitled to deduct additional costs in his or her German income tax return.

Relocation expenses are work-related if

  • the distance between home and the workplace is significantly reduced. This is the case if daily travelling time in total is reduced by at least one hour
  • a new home is required because the employee is working for the first time
  • the relocation is caused by working for a new employer or taking a new profession or job
  • the relocation is in the predominant interest of the employer or
  • a work-related, so called double household, is set-up or terminated.

Expenses for privately motivated relocations cannot be deducted for tax purposes. If an employer reimburses privately motivated expenses, this benefit will be subject to wage tax and social security contributions.

A relocation back home is work-related if

  • the employee has been assigned for a fixed period of time or
  • a work-related, so called double household, is terminated.

The following expenses can be deducted or reimbursed by the employer free of tax:

Transport of household goods

All expenses related to the transportation are deductable. This also applies for substantiated payments to privately supported individuals. The employer can reimburse these costs free of tax.

Travelling costs

The following expenses are deductable:

  • costs of transport (flight, train, car etc.)
  • extra expenses for food and drink (flat-rate amounts / lump sums)
  • costs of accommodation
  • other travel-related expenses

The employer can reimburse travelling costs of the employee, his or her children and other individuals who belong to the household.

The employer can reimburse costs directly related to the relocation. But, he can also reimburse costs for travelling to the new working place beforehand if the employee is searching for a new home or visiting a new flat. The employer can reimburse expenses for

  • two journeys if only one person is travelling or
  • one journey if two persons are travelling.

Compensation for additional expenses in connection with rented homes

The following rents are deductable and reimbursable for

  • a flat or home if the rental contract cannot legally be cancelled before the relocation takes place or
  • the new flat, if this flat had to be rented before the relocation date (for example because of maintenance work).

Other relocation expenses

Other expenses and costs are deductible or reimbursable. They are for example:

  • broker fees for procuring a rented flat or home (this does not apply for the purchase of an own home or flat)
  • additional costs for educating children, if connected to the change of address

Other relocation expenses can be deducted or reimbursed free of tax if certain requirements are met. It is possible to reimburse or deduct certain lump sums or actual costs, if documented.

International relocation expenses

International relocation expenses in this respect are

  • relocation between Germany and another country and
  • relocation outside of Germany

Relocation from another country to Germany connected with a new employment in or an assignment to Germany, are not considered to be an international relocation if the former or future home is situated abroad. For example: If a foreign citizen is employed by a German employer and therefore moves to Germany, this is not considered to be an international relocation.

The distinction between domestic and international relocation is of significance because relocation allowances and lump sums for international relocations are significantly higher than for domestic ones. There are various allowances and lump sums:

  • international relocation outside of the EU (USA, Switzerland etc.)
  • international relocation within the EU
  • relocation in connection with returning to Germany

Taxation of the employer

Reimbursed relocation expenses are deductible as business expenses, regardless of the fact if reimbursements have been tax exempt or not.

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

Relocation expenses Umzugskosten
Travelling expenses Reisekosten
Value added tax   (VAT) Umsatzsteuer (USt)

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

Bildquelle: www.fotalia.com

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Einen Kommentar schreiben

Kommentar von Paul Ogle |

Hello. My partner will end her contract with the Bavarian International School in Munich at the end of June. We will be looking for someone to transport our belongings back to New Zealand (our home) and will look at getting a 20'container. BIS has said that we must pay tax on our flights back home for myself and our children from Germany to NZ. They wrote: "if the flights are taxed at € 4.000, you pay € 1.460 tax. You will receive a net payment of € 1.018.
If you are taxed at € 3,000 on the moving costs, you pay € 1,954 tax. You will receive a net payment of € 1513". Could you please confirm such a statement? And then we can progress with our move. Please note that in the contract there was no mention at all about paying taxes for our flights back home (Section 12). In section 11, they did mention that taxes must be paid on shipping costs and this will be taken out of her wages. This seems a little odd that it wasn't included in the contract don't you think? Best regards and stay healthy, Paul Ogle

Taxation is spread over 2 months.

Antwort von Peter Scheller

What kind of tax do they talk about (VAT, Luftverkehrssteuer) ?

The next question is why you have to pay the tax. However, I do not know your wife's contract.

Kommentar von Gabriel |

Hello, I moved to Germany last year as I was offered a job. Now I am looking at deducting some moving expenses for my relocation. Is this possible?
It is a bit confusing in this article the fact that a man moving for work in Germany is not considered international relocation.

“ Relocation from another country to Germany connected with a new employment in or an assignment to Germany, are not considered to be an international relocation if the former or future home is situated abroad. ”

If my case can be considered international relocation, how can I make that clear in my tax return? Are the old and new addresses enough for the Tax Office?

Antwort von Peter Scheller

You can claim certain allowances (national relocation) but not the higher ones on international relocation.

Kommentar von Junaid Qamar |

I live alone in Munich and work for an IT company.

I am offered a job in Berlin with moving relocation expense budget of 2000EUR.

But my employer said that my temporary residence in Berlin for the first 3 months will not be tax free. Meaning i will not be reimbursed with full amount of 2000EUR even if i claim my rents.

Please guide.

Antwort von Peter Scheller

I am not give advice on this Website. You should ask your employer hat he really means.

Please see also:

https://scheller-international.com/blog-beitraege/deductible-expenses-for-work-related-second-household.html

https://scheller-international.com/blog-beitraege/job-related-expenses.html

Then you might require the professional help of a German tax adviser.

Kommentar von Aleks |

Hello,
I have relocated to Germany from France for new employment. My work contract started on the 1st of January 2020. When I am supposed to do the tax return for relocation costs, in the form for 2020 or 2019 (I relocated on the 27th of December 2019, but received my tax number in 2020).
Thank you!

Antwort von Peter Scheller

It depends whether you paid for the expenses 2019 or 2020.

Was ist die Summe aus 6 und 3?*