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Temporary Travel Costs Fully Tax Deductible, German Court Rules

by Ulrika Lomas, Tax-News.com, Brussels

07 October 2013


Germany's Federal Fiscal Court (BFH) in Munich has ruled that temporary workers in Germany are able to deduct from income tax the full cost of journeys made to and from their place of work as a business expense, and not just half the cost, as is currently the case for permanent employees.

In case number VI R 43/12, the BFH explained that a company in Switzerland had recruited a worker from the German state of Baden-Württemberg on a temporary basis and for an "indefinite" and therefore unspecified timeframe. Following the termination of his contract, the temporary employee subsequently deducted from income tax the full cost of traveling to and from the workplace.

Rejecting the taxpayer's claim for entitlement to full tax relief, the German tax authorities insisted that it is only possible for an employee to deduct from tax as a business expense the costs incurred for a single journey to the place of work, in accordance with the commuting allowance provisions.

Siding with the plaintiff, the BFH deemed that in this case, the temporary employee should be considered in the same vein as an employee working for a certain period of time at a corporate client's place of work. The BFH had already ruled that under these circumstances employees are able to deduct the full commuting cost from income tax.

Justifying the decision in both cases, the Federal Fiscal Court agued that unlike permanent employees, temporary workers and employees subcontracted out by their employer are not in a position to lower their commuting expenses by seeking alternative routes or modes of transportation.

TAGS: individuals | tax | business | employees | Germany | Switzerland | tax breaks | individual income tax

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