Lohnsteuer
Tax recognition of expenses for the entertainment of persons on business occasions in a hospitality business as business expenses (Letter of the German Federal Ministry of Finance dated 30 June 2021 (IV C 6 - S 2145/19/10003:003)) - Consequences for the deduction of wage tax
In its letter dated June 30, 2021, the Federal Ministry of Finance revised its letter dated November 21, 1994 (BStBl I p. 855) with regard to the tax recognition of expenses for the entertainment of persons for business purposes in a hospitality business as business expenses. The letter is to be applied in all open cases with the proviso that the amount limits of Sec. 33 Value Added Tax Implementing Ordinance (VATIO) applicable in the respective assessment period are to be observed. With regard to the recognition for tax purposes of expenses incurred by a taxpayer for business entertainment, there will also be new stricter requirements with regard to invoices generated automatically by a hospitality business in accordance with Sec. 6 of the German Cash Security Ordinance (GCSO) from January 1, 2023 at the latest.
Overview of the recognition of entertainment expenses as business expenses
Pursuant to Sec. 4 para. 5 sentence 1 no. 2 sentence 1 of the German Income Tax Act (GITA), taxpayers may claim entertainment expenses for the entertainment of persons for business purposes as business expenses up to a maximum of 70% of the expenses deemed to be reasonable.
However, in accordance with Sec. 4 para. 5 sentence 1 no. 2 sentence 2 et seq. GITA, consideration as a business expense is particularly linked to the fulfillment of formal and technical requirements for the respective entertainment receipt.
A deduction of reasonable entertainment expenses as business expenses therefore requires the taxpayer to provide written proof of the place, day, participants, occasion, and amount of the expenses. The written information required for this purpose must be provided in a timely manner in the form of a receipt signed by the taxpayer, which is generally informal.
In the case of hospitality in a hospitality business (e.g., pub, restaurant, etc.), however, the information on the occasion and the participants of the hospitality is sufficient (Sec. 4 para. 4 sentence 1 no. 2 sentence 3 GITA, R 4.10 para. 8 sentence 2 Income Tax Guidelines (ITG)). However, the entertainment receipt must be attached as proof of the remaining requirements.
In the case of so-called micro invoices, which do not exceed a total amount of 250 euros, the requirements of Sec. 33 VATIO must also be met as a minimum.
Overview of the recognition of entertainment expenses as business expenses
Pursuant to Sec. 4 para. 5 sentence 1 no. 2 sentence 1 of the German Income Tax Act (GITA), taxpayers may claim entertainment expenses for the entertainment of persons for business purposes as business expenses up to a maximum of 70% of the expenses deemed to be reasonable.
From Sebastian Dirk and Simeon Wahl
Double Taxation Agreement between Germany and Russia - Wage tax consequences for employees
Russia has been on the EU list of non-cooperative countries and territories for tax purposes ("blacklist") since February 2023. As part of this, on 08 August 2023, Russia signed a decree which temporarily suspends several double taxation agreements - including the double taxation agreement between Russia and Germany ("DTA"). Section 5 to 22 and section 24, as well as parts of the protocol, are affected. It is currently not clear at what point the DTA will become no longer valid, as a draft law to this effect is still being prepared. However, it is not unreasonable that the Russian tax authorities will no longer accept the DTA already from the date of entry into force of the decree (08 August 2023). Since the suspensions are one-sided for the time being, Germany must in principle continue to apply the regulations of the DTA - until Germany also suspends the DTA.
Implications for employees in practice
The DTA covers employees who are resident in one of the contracting states or in both contracting states. In principle, a natural person is a resident of a contracting state if a person is liable to tax there under the law of that state based on his domicile or permanent residence.
From Stefan Sperandio, Johanna Wolter and Kim Florence Bachmann
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