❗️Important❗️

This feature is part of the Professional Plan only. If your company is on the Basic Plan, you will be required to upgrade to start using this feature. More on our pricing plans here.

This article describes:

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

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

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

📝 Note: If a traveler doesn’t return to the same destination for the same project for 28 days, the 3-month rule doesn’t apply anymore and the counting restarts from zero.

❗️Please note,❗️once it has been marked that a trip falls under the three-month rule, the per diem amount is set to 0€ and the employee does not receive a refund.

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 normal income according to German law.

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.

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.

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.

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 their trip.

Please note: The information in this help article is not the same as legal advice, but only explains how Circula works. In principle, please contact your tax advisor to clarify the details for your company.

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