This article describes:

  • what the three-month rule is
  • how is it triggered on Circula
  • the implication it has on submitters and accountants

What is the three-month rule

Per diems perceived by employees of German companies correspond to a financial compensation for the additional costs of food and accommodation when traveling. This means, they are not part of the employees income, and are therefore (up to a legal limit), tax free.

However, these benefits are not unlimited, and are capped to three months. After this three-month period, also known as the "three-month rule", or "Dreimonatsfrist", these benefits are considered as income, and are thus taxable.

How is the three-month rule detected in Circula

Circula helps you identify when the three-month rule might apply. The following conditions need to be met:

  • The company is German
  • The employee travels regularly to a single location more than three months
  • Each week, the employee stays in that location more than two days
  • The project of the trip is the same, or all trips have no project listed

📝 Note: the three-month rule doesn’t apply if there is no trip made by the employee to the single remote location for four weeks in a row or more.

Example

Example 1 - the three-month rule applies

Antoine works for the company ABC GmbH, based in Berlin. They want to open a new office in Hamburg. For this, Antoine travels to Hamburg from the 1st of September to the 15th of November. He comes back to Berlin, and goes again to Hamburg from the 18th of November to the 8th of December.

In this case, Antoine spent more than 90 days in a single remote location for the same purpose. The three-month rule applies.

He will receive per diems for all the time spent in Hamburg, following to the relevant per diem rates. The per diems received starting on the 91st day (i.e. the 2nd of December) will be taxable as a normal income according to German law.

Example 2 - the three-month rule doesn't apply

Leonard works for the company XYZ KG & Co, based in Munich. For business purposes, Leonard needs to go to London to visit customers.

He goes there from the 1st of July to the 31st of August to visit customer A.

He goes to London again from the 1st of October to the 15th of November to visit customer B.

Even if Leonard has spent more than 90 days in London, the purpose is different. The three-month rule doesn't apply.

He will receive per diems for all the time spent abroad, following the relevant per diem rates. The per diems will be tax free.

Implication for submitters

Mobile App

When submitting a trip on the mobile app, Circula automatically detects the three-month rule. The user can manually add it to the trip.

An icon appears in the bottom left corner when submitting a trip, if more than 90 days have been spent in a single remote location. When clicking on it, the employee has the choice to add or not the three-month rule.

Click on the icon in the left bottom corner to add the three-month rule

Web App

When submitting a trip on the web app, Circula automatically detects the three-month rule. The user can manually add it to the trip.

An exclamation mark appears in the To-Dos section when creating a trip if more than 90 days have been spent in a single remote location. When clicking on it, a submitter can manually add the three-month rule to its trip.

Click on "Apply rule" or activate manually the three month rule

Implication for supervisors and accountants

When approving or controlling a trip, Circula automatically detects the three-month rule.

An exclamation mark appears in the Pending Controlling section. When clicking on it, an accountant can manually add the three-month rule to its trip.

Click on "Apply rule" to add the three-month rule

Source:
http://einkommensteuerrichtlinien.de/LStR-9-6-Verpflegungsmehraufwendungen-als-Reisekosten.html

Do you still have questions?

💬 Chat Support
📞+49 30 588 491 01
✉️ support@circula.com

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