(2023) How to claim hospitality expenses as income-related expenses for tax purposes!

Employees are generally reimbursed for expenses incurred for entertaining clients on behalf of their employer. However, this may differ if the employee receives performance-related payments.

As a general rule: Expenses incurred by an employee for entertaining guests on the occasion of a personal event (birthday, promotion, anniversary, etc.) are considered non-deductible private expenses according to established case law. The Federal Fiscal Court (BFH) has ruled that the occasion of the event should not be the sole determining factor; a comprehensive assessment should also consider other circumstances (judgment of 11 January 2007 VI R 52/03).

For the professional or private nature of the entertainment expenses, it is also important to consider, for example, where the event takes place, who acts as host, who determines the guest list, and whether the guests are colleagues, business associates, press representatives, or private acquaintances or relatives of the taxpayer.

Thus, the BFH applies criteria for expenses that it has developed for distinguishing between taxable wages and benefits in the employer's operational interest on the income side.

 

Electronic cash registers are subject to special recording and security requirements to prevent manipulation. The Cash Register Security Ordinance requires that issued receipts must contain transaction and serial numbers of the electronic recording system or the security module. The transitional regulation expired on 31 December 2022.

As the new security features are mandatory, customers should ensure that restaurant bills contain the required information, possibly in the form of a QR code.

If the restaurant does not have an electronic cash register, the Berlin-Brandenburg Fiscal Court ruled that handwritten invoices are sufficient as entertainment bills and are 70 percent deductible (FG Berlin-Brandenburg, 8 November 2021, 16 K 11381/18).

Note: Trust is good, control is better. Ensure you receive the final receipt, as only this will be recognised by the tax office.