Per Diems for Dummies - Germany

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If there's one thing we've learned since launching Xpenditure, it’s that there are lots of ways to deal with company expenses. In most countries, businesses can come up with their own policy for handling them. Some employers cover all costs for their employees, while others require them to chip in — this flexibility makes it easy to create a custom plan that fits the company.

In some countries, however, the government enforces strict rules about how your company should deal with business trips' expenses. These systems often work with per diems, fixed amounts of money to spend during a day abroad. While per diems were set to ease the life of the business traveler. 

They can be notoriously complicated, and if you've never before heard of them, it's about time for an introduction.

That's why we're starting a new series, Per Diems for Dummies, in which we explain the situation in various countries that use the system. This time, we're taking a closer look at the home of the world's best beer and sausages — Germany.

 

Why working with per diems is terrible and amazing

The entire system is obviously pretty complicated — there's so much to take into account that keeping track of everything can be hard. When you're managing hundreds employees travelling to a large amount of different countries every year, it adds up to an enormous amount of administrative work.

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But once you get to terms with the extra workload, there's also lots to like about the system — both for employers and employees. Businesses don't need to come up with a reimbursement system, as the rules are already set by the government.

On the other hand, employees have the security that their travel costs are always taken of — at least if they can find themselves in the set rates. When travelling abroad, per diem rates are                                                                        usually quite high.

As a result of this, employees generally have more than enough pocket money for their stay, enabling to spend the remainder on entertainment or other leisure activities — a nice perk

Bottom line, it’s a lot of stuff to deal with. But we can help.

 

Verpflegungsmehraufwand

The German language is home to some awfully long words, and this one is a prime example. Roughly translated to meal allowance, it refers to the government-imposed system of daily allowances for business travellers.

Depending on the duration and the location of a business trip, employees in Germany are entitled to a set amount of money every day — that's the per diem. The amounts are defined in the Einkommensteuergesetz, the German Income Tax Act. There are different rules for travel within the country and international trips.

 

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Trips within Germany

For domestic business trips, employees receive the following per diems:

Multi-day trips:

  • €24 for every 24 hours that they're away from their home and primary workplace
  • €12 for the day of departure and arrival, if the employee doesn't spend the night at their own home

Single-day trips:

  • €12 for the calendar day if the employee spends at least 8 hours away from their home or primary workplace.

 

Trips outside of Germany

When employees embark on an international trip, different rules apply — and this is where it gets complicated.

The German government sets per diem amounts forevery country according to the cost of living there. Every year a new document is released with all amounts adjusted to the new situation in the various countries.

There are three rates per country:

  • Rate for 24-hour absence from home and primary workplace
  • Rate for the day of arrival and departure
  • Rate for the cost of an overnight stay

All amounts are listed per country, but exceptionally expensive cities have their own adjusted rate — life in a capital or big city can be considerably more expensive than on the countryside.

For example, according to the 2017 document, this is what a German employee traveling to London can claim:

  • €62 per full 24 hours
  • €41 for the day of arrival and departure
  • €224 per overnight stay

 

Special rules

Even though the base rules of the Verpflegungsmehraufwand are already quite complicated, they don't cover all cases. When spending money on certain things, special rules apply.

Meals

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Employees on a business trip need to pay close attention to the meals they're having. When these are offered at no cost, or when meals are provided as part of the reimbursable travel or lodging, a percentage needs to be deducted from the allowance per calendar day.

An example of this could be free breakfast supplied by the hotel where the emplo

yee is staying, or a complimentary dinner offered at a conference. For 2017, the deductible percentages are:

  • Breakfast: 20%
  • Lunch: 40%
  • Dinner: 40%

Important to note is that this means that the total allowance per day is reduced to zero when all meals (breakfast, lunch and dinner) are provided.

 

Entertainment

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This category is especially complicated — for an entertainment expense to qualify, a 

third party needs to be entertained. It won't count for employees working for the same company, it has to be someone else.

Also, invoices for entertainment expenses need to adhere to certain quality standards.

The following information needs to be visible on the document for it to be reimbursable:

  • Name of employee or employees
  • Name of the people that were 'entertained'
  • The reason for entertainment
  • Place, date and signature

 

Limit protection

If for some reason your employer doesn't pay out the minimum per diem rates as set by the German government, it's good to know you're protected. The amount of unpaid money up to the set rates can be claimed back on your yearly tax return.

 

General info

There are some additional things to take into consideration.

  • If the employee goes on multiple day trips during the same day, all hours can be added together
  • Employers can only offer tax-free reimbursement to employees for three months of continuous business travel. This period can be restarted after a four-week break
  • When an activity begins after 4 PM and ends before 8 AM the next day, the total time can be attributed to one entire calendar day
  • All expense invoices should be addressed to the company's corporate address
  • If invoices are over €150 they're required to note the employer's name, address and VAT amount
  • All original expense documents, like receipts and invoices, need to be physically or digitally backed up in the EU according to German law 

 

Xpenditure to the rescue

Using an advanced expense management platform doesn't just make it easier to enter expenses for employees — it can also save administrative teams a lot of time.

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Xpenditure is perfectly equipped to deal with the complicated reality of the per diem system.

Together with our partner Deloitte, we've worked hard to integrate a host of features for our German customers, making sure we offer an experience that's perfectly customised to local needs. 

All per diems are automatically uploaded and maintained by a dedicated team — employees only need to enter their trip details in the Xpenditure app via their smartphone and everything is automatically calculated based on the rules set by the company. The traveler can them submit all his due per diems for approval in one simple tap.

We also make sure everything is in perfect compliance with German law. For example, when a meal has been entered on the same day as a per diem, we send out a warning to the user and controllers.

This way, all expense information is parsed correctly without leaving room for abuse of the system.

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All of this is on top of our regular services, including real-time expense management for the entire company. Employees on the road can easily upload their receipts through the app, while managers are able to approve or decline them just as quickly.

As you can see, dealing with the German system definitely has its pros and cons, but one thing is for sure — Xpenditure makes it a lot easier.

Team Xpenditure

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Nisrine Douidy

Posted by Nisrine Douidy

Head of Content & Communications

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